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4-1. Compare the equivalent annual costs of perpetual service for the following two plans for a government project using an i* of 9%: Plan I

4-1. Compare the equivalent annual costs of perpetual service for the following two plans for a government project using an i* of 9%: Plan I involves an initial investment of $150,000. Of this, $75,000 is for land (assumed to be permanent) and $75,000 is for a structure that will require renewal, without salvage value, at an estimated cost of $75,000 every 30 years. Annual disbursements will be $10,000 for the first 10 years and $7,000 thereafter. Plan II involves an initial investment of $250,000. Of this, $100,000 is for land and $150,000 is for a structure that will require renewal, with a $30,000 salvage value, every 50 years. Assume that the net outlay for each renewal is $120,000. Annual disbursements will be $4,000. (Ans. Plan I, $22,784; Plan II, $26,648) A university numns its water supply from wolle located L
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4-1. Compare the equivalent annual costs of perpetual service for the following two plans for a government project using an i of 9% : Plan I involves an initial investment of $150,000. Of this, $75,000 is for land (assumed to be permanent) and $75,000 is for a structure that will require renewal, without salvage value, at an estimated cost of $75,000 every 30 years. Annual disbursements will be $10,000 for the first 10 years and $7,000 thereafter. Plan II involves an initial investment of $250,000. Of this, $100,000 is for land and $150,000 is for a structure that will require renewal, with a $30,000 salvage value, every 50 years. Assume that the net outlay for each renewal is $120,000. Annual disbursements will be $4,000. (Ans. Plan I, $22,784; Plan II, $26,648 )

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