Answer the problem below and submit your output in tabular form. You may use the Annual WorthCost method for uniformity.PROBLEMThe engineer of a medium-scale industry was instructed to prepare at least two plans which is to beconsidered by management for the improvement of their operations.Plan A calls for an initial investment of 200,000 pesos now with a prospective salvage value of 20% ofthe first cost 20 years hence. The operation and maintenance disbursements are estimated to be 15,000per year and taxes will be 2% of the first cost.Plan B calls for an immediate investment of 140,000 pesos and a second investment of 160,000 eightyears later. The operation and maintenance disbursements will be 9,000 a year for the initial installationand 8,000 a year for the second installation. At the end of 20 years the salvage value shall be 20% of theinvestments. Taxes will be 2% of the first cost.If money is worth 12%, which plan would you recommend?

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um-scale industry was instructed to prepare at least two plans whic nent for the improvement of their operations. l investment of 200,000 pesos now with a prospective salvage value

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Answer the problem below and submit your output in tabular form. You may use the Annual Worth
Cost method for uniformity.
PROBLEM
The engineer of a medium-scale industry was instructed to prepare at least two plans which is to be
considered by management for the improvement of their operations.
Plan A calls for an initial investment of 200,000 pesos now with a prospective salvage value of 20% of
the first cost 20 years hence. The operation and maintenance disbursements are estimated to be 15,000
per year and taxes will be 2% of the first cost.
Plan B calls for an immediate investment of 140,000 pesos and a second investment of 160,000 eight
years later. The operation and maintenance disbursements will be 9,000 a year for the initial installation
and 8,000 a year for the second installation. At the end of 20 years the salvage value shall be 20% of the
investments. Taxes will be 2% of the first cost.
If money is worth 12%, which plan would you recommend?

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