A state highway department is trying to decide whether it should“hot-patch†a short section of an existing country road orresurface it. If the hot-patch method is used, approximately 300cubic meters of material would be required at a cost of $700 percubic meter (in place). Additionally, the shoulders will have to beimproved at the same time at a cost of $24,000. These improvementswill last 2 years, at which time they will have to be redone. Theannual cost of routine maintenance on the patched up road would be$5000. Alternatively, the state can resurface the road at a cost of$850,000. The surface will last 10 years if the road is maintainedat a cost of $2000 per year beginning 4 years from now. No matterwhich alternative is selected, the road will be completely rebuiltin 10 years. At an interest rate of 9% per year,
a. make a recommendation on the best alternative based on theannual worth analysis.
b. make a recommendation based on the present worth method
