Question $4$: A contractor has a contract to construct a $3600$ M long tunnel in $30$ months he is trying to decide whether to do the job with his own forces or subcontract the job. You are to calculate the equivalent monthly cost under each alternative. His i$=1\mathrm{.}75\%$ per month. Production under both alternatives will be $120$ m per month.

Alternative A: Buy a tunnelling machine and work with own force.

Cost of tunnelling machine $=$ Rs $20$ million

Salvage value of machine at end of month $30=$ Rs $4$ million

Cost of labour and material $=$ Rs $10,000/$m for the first $10$ months, and increasing by $0\mathrm{.}5\%$ per month at EOM each month thereafter $($i$.$e$.$ Rs $10050/$m at EOM$11,$ Rs $10100\mathrm{.}25$ at EOM$12$ etc.$)$

Alternative B: Subcontract the work. Cost is Rs $27,000$ per metre of tunnel.