Proposal 1 requires dredging the canal. The state is planning to purchase the dredging equipment and accessories for $650,000. The equipment is expected to have a 10-year life with a $17,000 salvage value. The annual operating costs are estimated to total $50,000. To control weeds in the canal itself and along the banks, environmentally safe herbicides will be sprayed during the irrigation season. The yearly cost of the weed control program is expected to be $120,000. Proposal 2 is to line the canal walls with concrete at an initial cost of $4 million. The lining is assumed to be permanent, but minor maintenance will be required every year at a cost of $5000. In addition, lining repairs will have to be made every 5 years at a cost of $30,000. Proposal 3 is to construct a new pipeline along a different route. Estimates are an initial cost of $6 million, annual maintenance of $3000 for right-of-way, and a life of 50 years. Choose the best proposal based on annual worth, using an interest rate of 5% per year.
Department of Agriculture is considering three proposals for increasing the capacity of the main
drainage canal in Baguio City.
Proposal 1 requires dredging the canal. The state is planning to purchase the dredging
equipment and accessories for $650,000. The equipment is expected to have a 10-year life with a
$17,000 salvage value. The annual operating costs are estimated to total $50,000. To control weeds
in the canal itself and along the banks, environmentally safe herbicides will be sprayed during the
irrigation season. The yearly cost of the weed control program is expected to be $120,000.
Proposal 2 is to line the canal walls with concrete at an initial cost of $4 million. The lining is
assumed to be permanent, but minor maintenance will be required every year at a cost of $5000. In
addition, lining repairs will have to be made every 5 years at a cost of $30,000.
Proposal 3 is to construct a new pipeline along a different route. Estimates are an initial cost
of $6 million, annual maintenance of $3000 for right-of-way, and a life of 50 years.
Choose the best proposal based on annual worth, using an interest rate of 5% per year.
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