Question: Two possible routes for a power line are under study. Data on the routes are as shown in the following table: Option Information Around the

Two possible routes for a power line are under study. Data on the routes are as shown in the following table:

Option

Information

Around the Lake

Under the Lake

Length

15 km

5 km

First Cost

$5000 / km

$25,000 /km

Maintenance cost

$200/km/yr

$400/km/yr

Useful Life (years)

15

20

Salvage Value

$3000/km

$5000/km

Yearly power loss

$500/km

$500/km

Annual Taxes

2% of the first cost

2% of the first cost

If MARR = 10%, which alternative should you select? Justify your answer. (7 points)

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