It is proposed to increase the capacity of the existing water transmission line in a certain city. Among the options are as follows:

Option 1: constructing a parallel pipe.

The initial cost for this proposed option is Php 2, 500, 000 with a life of 20 years and the annual operating cost is worth Php 50, 000

Option 2: constructing a booster pumping station

This costs Php 1, 000, 000 with a life of 20 years. A pumping equipment which costs Php 200, 000 with a life of 10 years and a scrap value of Php 20, 000 is also included in this option. The annual operating cost is Php 150, 000.

For both options, money is worth 12%.

Using the present value method, what is the present value of option 1?

A. Php 2, 250, 000

B. Php 2, 050, 000

C. Php 1, 870, 000

What is the present value of option 2?

A. Php 2, 580, 000

B. Php 2, 080, 000

C. Php 2, 380, 000

Which option is more economical?