TEI incorporated is considering the use of concrete electric pole in the expansion of its power distribution lines. A concrete pole costs P18,000 each and will last for 15 years. The company is presently using creosoted wooden poles which cost P12,000 per pole and will last 10 years. Assume annual taxes amount to 2% of the first cost and zero salvage value in both cases. .Evaluate the two options and recommend which one is to be chosen using the methods indicated . Money is worth 12% Using the Annual Cost Method. Annual Cost of Wooden Poles = __________________ , Annual Cost of Concrete Poles = _________________

TEI incorporated is considering the use of concrete electric pole in the expansion of its power distribution lines. A concrete pole costs P18,000 each and will last for 15 years. The company is presently using creosoted wooden poles which cost P12,000 per pole and will last 10 years. Assume annual taxes amount to 2% of the first cost and zero salvage value in both cases. .Evaluate the two options and recommend which one is to be chosen using the methods indicated . Money is worth 12% Using the Annual Cost Method. Annual Cost of Wooden Poles = __ , Annual Cost of Concrete Poles = _

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 2E

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