1. A utility is considered two alternatives for serving a new customer. Both plans provide
twenty years of service, but plan A requires one large initial investment, while plan B
requires additional investment at the end of ten years. Neglect the salvage value, assume
interest at 8%, and determine the present cost of both plans.
Initial Investment
Plan A
$50,000
Plan B
Investment at end of 10 years
none
$30,000
$30,000
Annual property tax and maintenance
For years 1-10 years
$800
$500
Annual property tax and maintenance
For years 11-20 years
$800
$900
