govrnment plans to increase the capacity of the 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 P100M and the life is 40 years, with an annual operating cost of P5M for the 1st 20 years and P10M for the next 20 years. Plan B requires the construction of a booster pumping station costing P193,063,282M with the life of 50 years. The pumping equipment cost an additional amount of P50M and has a life of 25 years and a salvage value of P2M. The annual operating cost is P9,250,570 for the 1st 15 years and P12,108,424 for the next succeeding years. Using the Present Value (PV) Method and an interest of 23% cpd. annually, what is the PV of Plan B?
The govrnment plans to increase the capacity of the 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 P100M and the life is 40 years, with an annual operating cost of P5M for the 1st 20 years and P10M for the next 20 years. Plan B requires the construction of a booster pumping station costing P193,063,282M with the life of 50 years. The pumping equipment cost an additional amount of P50M and has a life of 25 years and a salvage value of P2M. The annual operating cost is P9,250,570 for the 1st 15 years and P12,108,424 for the next succeeding years. Using the Present Value (PV) Method and an interest of 23% cpd. annually, what is the PV of Plan B?
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