Question: Two possible routes for a power line are under study. The following table provides the data collected to determine the best route. Around the Lake

Two possible routes for a power line are under study. The following table provides the data collected to determine the best route.

Around the Lake

Under the Lake

First cost

$135,000

$125,000

Maintenance

$3000/yr

$1,500/yr

Annual Power Loss

$7500/yr

$2500/yr

Salvage Value

$0

$0

Useful Life

15 years

15 years

Interest rate

8%

8%

a.Compute the EUAC for the first route (i.e. around the lake)

b.Compute the EUAC for the second route (i.e. under the lake)

c.Should the power lien be routed around the lake or under the lake?

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