A city is considering the development of a recreational complex. Two plans are under consideration: Under plan 1, building will have to be refurbished at a cost of $60,000 every 15 years and facilities have to be refurbished at a cost of $100,000 every 10 years. Under plan 2, building will have to be refurbished every 25 years and facilities every 10 years at a cost equal to origional cost of construction. Considering "infinite life", which alternative should be selected based on a) Present worth analysis (interest = 10%) b) Annual cash flow analysis (interest = 10%) Plan 1 $125,000 $125,000 Plan 2 Land development (life permanent) Buildings (life permanent) $125,000 $175,000 Recreational Facilities (life $100,000$100,000 permanent) Annual maintenance DO NOT COPY FROM CHEGG I NEED A FULL EXPLANATION $12,000 $4,000

A city is considering the development of a recreational complex. Two plans are under consideration: Under plan 1, building will have to be refurbished at a cost of $60,000 every 15 years and facilities have to be refurbished at a cost of $100,000 every 10 years. Under plan 2, building will have to be refurbished every 25 years and facilities every 10 years at a cost equal to origional cost of construction. Considering "infinite life", which alternative should be selected based on a) Present worth analysis (interest = 10%) b) Annual cash flow analysis (interest = 10%) Plan 1 $125,000 $125,000 Plan 2 Land development (life permanent) Buildings (life permanent) $125,000 $175,000 Recreational Facilities (life $100,000$100,000 permanent) Annual maintenance DO NOT COPY FROM CHEGG I NEED A FULL EXPLANATION $12,000 $4,000

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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