Use time value of money, A town has to resurface a section

Use time value of money

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Reference no: EM13847091

A town has to resurface a section of its roads. There are two options: gravel or going through another company that uses another surfacing technique. The gravel has an initial cost of $200,000 to put down and it costs $15,000 to grade the road on an annual basis. The other surfacing technique costs $300,000 to install, but only requires $45,000 maintenance once every five years. The gravel road will last ten years while the new surfacing technique will last 15 years. The town's cost of capital is 9%. Which road surfacing option should the town choose (use time value of money)?

Reference no: EM13847091

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