Economics The government plans to increase the capacity of her existing water transmission lines in Cebu City. Two plans are under consideration. Plan A requires the construction of a parallel pipeline, the flow
Economics The government plans to increase the capacity of her existing water transmission lines in Cebu City. Two plans are under consideration. Plan A requires the construction of a parallel pipeline, the flow
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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
Transcribed Image Text:Economics
The government plans to increase the
capacity of her existing water transmission
lines in Cebu City. Two plans are under
consideration. Plan A requires the
construction of a parallel pipeline, the flow
being maintained by gravity. The initial cost is
P189376952 and the life is 50 years, with an
annual operating cost of P7825990 for the 1st
25 years and P10659043 for the next 25
years. Plan B requires the construction of a
booster pumping station costing P100M with
the life of 50 years. The pumping equipment
cost an additional amount of P25M, it has a
life of 25 years and a salvage value of P2M.
The annual operating cost is P5M. Using the
Present Value (PV) Method and an interest of
22% cpd. annually, what is the PV of Plan A?
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