Two possible routes for a power line are being evaluated.

In both cases the power line will last 14 years, have zero salvage value, have annual property taxes of 1% of the initial cost, and have yearly power losses that cost $581 per mile per year.

Using an 6% annual interest rate:

What is the equivalent annual cost of routing around the lake?

What is the equivalent annual cost of routing under the lake?

Route Options

	(1) Around the Lake	(2) Under the Lake
Length	14 miles	5 miles
Initial Cost	$12,000/mile	$24,000/mile
Maintenance	$135/mile/year	$300/mile/year