Two methods of carrying away surface runoff water from a new subdivision are being evaluated: METHOD A: Dig a ditch. The initial cost would be P3 million and P1 million of redigging and shaping would be required at five-year intervals forever. METHOD B: Lay concrete pipe, The initial cost would be P7.5 million, and replacement pipe would be required at 50-year intervals at a net cost of P9 million indefinitely. At i = 12%, which method is the better one in terms of having a smaller cost?
Two methods of carrying away surface runoff water from a new subdivision are being evaluated: METHOD A: Dig a ditch. The initial cost would be P3 million and P1 million of redigging and shaping would be required at five-year intervals forever. METHOD B: Lay concrete pipe, The initial cost would be P7.5 million, and replacement pipe would be required at 50-year intervals at a net cost of P9 million indefinitely. At i = 12%, which method is the better one in terms of having a smaller cost?
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
Problem 1PS
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![Two methods of carrying away surface runoff water from a new subdivision are being
evaluated:
METHOD A: Dig a ditch. The initial cost would be P3 million and P1 million of redigging and
shaping would be required at five-year intervals forever.
METHOD B: Lay concrete pipe, The initial cost would be P7.5 million, and replacement pipe
would be required at 50-year intervals at a net cost of P9 million indefinitely.
At i = 12%, which method is the better one in terms of having a smaller cost?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F80121123-afd3-4b9a-bb14-ad015fef9bb2%2F37d575c1-2d6e-456a-85cd-941fe93c70a3%2F2bl4cz.png&w=3840&q=75)
Transcribed Image Text:Two methods of carrying away surface runoff water from a new subdivision are being
evaluated:
METHOD A: Dig a ditch. The initial cost would be P3 million and P1 million of redigging and
shaping would be required at five-year intervals forever.
METHOD B: Lay concrete pipe, The initial cost would be P7.5 million, and replacement pipe
would be required at 50-year intervals at a net cost of P9 million indefinitely.
At i = 12%, which method is the better one in terms of having a smaller cost?
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