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%

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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TEl 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%
* Required
1. Using the Annual Cost Method.
Annual Cost of Wooden Poles =
Annual Cost of Concrete Poles =
Recommendation:
2. Using the EAC Method.
EUAC Wooden Pole =
EUAC Concrete Pole =
Recommendation:
3. Using the Present worth method.
PWC of Wooden Pole =
PWC of Concrete Pole =
Recommendation:
Transcribed Image Text:TEl 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% * Required 1. Using the Annual Cost Method. Annual Cost of Wooden Poles = Annual Cost of Concrete Poles = Recommendation: 2. Using the EAC Method. EUAC Wooden Pole = EUAC Concrete Pole = Recommendation: 3. Using the Present worth method. PWC of Wooden Pole = PWC of Concrete Pole = Recommendation:
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