5-31. Old Town needs to resurface a section of its roads this spring. The town council is con- sidering using one of two technologies. The first involves putting down stone and gravel the first year and grading the road on an annual basis for the next 10 years. The sec- ond involves the application of a road surface called Sure-Pack. Sure-Pack requires main- tenance only every 5 years. Based on expe- rience, the town counselors know the gravel road will last 10 years. The folks in Hiltown, the next town up Route 1, Sure-Packed their roads and expect to get 15 years from them before they will need to be resurfaced again. The cash flows for each alternative are shown in the table below. If Old Town's discount rate is 8 percent, which alternative should they choose? Use an annualized cost analysis to support your answer. Year Gravel Sure-Pack 0 $200,000 $300,000 1 15,000 2 15,000 3 15,000 4 5 55,000 6 15,000 15,000 15,000 15,000 15,000 15,000 7 8 9 10 15,000 55,000 11 12 13 14 15 Problem 5-31 Discount Rate - rate Gravel Sure Pack Useful Life Maintenance Annuity Acquisition Cost NA Gravel Sure Pack Sure Pack PV Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 PV of Maintenance Acquisition Cost Net Present Cost $ - $ Annualized Cost