Which option is less costly

Reference no: EM13289890

The narrow gravel road to Johnson Lake is open only for the summer months. At present the county spends $750 per mile each year to prepare the road for summer traffic and another $150 per mile for maintenance during the period in which it is open. A "permanent" road could be constructed at a cost of $10,000 per mile'; the county would have to spend $800 per mile for maintenance only every 5 years through the 30 year life of the road. prospects for the area suggest that the road would have to be relocated at the end of that period. If 8% is reasonable discount rate, which option is less costly? what discount rate would cause the two alternatives to have the same cost in the present value terms. Please show work.

Reference no: EM13289890

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