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4. (7 marks) Two methods of carrying away surface runoff water from a new subdivision are being evaluated: Method A: Dig a ditch. The initial

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4. (7 marks) Two methods of carrying away surface runoff water from a new subdivision are being evaluated: Method A: Dig a ditch. The initial cost would be $60,000 and $25,000 of redigging and shaping would be required at the end of every 5-year interval. Method B: Lay concrete pipe. The initial cost would be $130,000 and a replacement would be required at 25-year intervals. At the end of each of the 25 years, the concrete can be recycled at a market value (salvage) of 15,000. If the required return is 12%, which method should you choose? Why? Show your work

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