It is proposed to place a cable on existing pole line along the shore of a lake to connect two points on opposite sides. Which is more economical? Compare alternatives using the following methods: a) ROR on Additional Investment Method b) Annual Cost Method c) Equivalent Uniform Annual Cost Method d) Present Worth Cost Method

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 10E
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It is proposed to place a cable on existing pole line along the shore of a lake to connect two points on opposite sides. Which is more economical?


Compare alternatives using the following methods:
a) ROR on Additional Investment Method
b) Annual Cost Method
c) Equivalent Uniform Annual Cost Method
d) Present Worth Cost Method

Land Route
Submarine Route
Length, miles
10
First Cost of Cable per mile
P 40, 000
Р 68, 000
Annual Maintenance per mile P 950
Р3, 500
Interest on investment
18%
18%
Таxes
3%
3%
Net Salvage value per mile
P 12, 000
P 22, 000
Life, years
15
15
Transcribed Image Text:Land Route Submarine Route Length, miles 10 First Cost of Cable per mile P 40, 000 Р 68, 000 Annual Maintenance per mile P 950 Р3, 500 Interest on investment 18% 18% Таxes 3% 3% Net Salvage value per mile P 12, 000 P 22, 000 Life, years 15 15
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