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Q1: Determine the present worth of option a and b. Q2: Which option should...

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Finance

imageQ1: Determine the present worth of option a and b.

Q2: Which option should be selected?

Delcon Properties is a commercial developer of shopping centers and malls in various places around the country. The company needs to analyze the economic feasibility of rainwater drains in an area that it plans to develop. Since the development won't be started for 12 years, this large open space will be subject to damage from heavy thunderstorms that cause soil erosion and heavy rutting. Delcon has two options (A and B). Assume an interest rate of 4% per year. Option A: If no drains are installed, the cost of refilling the washed out area is expected to be $1,500 per year. Option B: A temporary corrugated steel drainage pipe could be installed that will prevent the soil erosion. The cost of the pipe will be $3 per foot for the total length of 7,000 feet required. The pipe will have a salvage value of $4,000 at the end of the 12-year period

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