Problem
The city engineer has prepared two plans for roads in the city park. Both plans meet anticipated requirements for the next 40 years. The city's minimum attractive rate of return is 7%. Plan A is a three-stage development program: $300,000 is to be spent now followed by $250,000 at the end of 15 years and $300,000 at the end of 30 years. Annual maintenance will be $75,000 for the first 15 years, $125,000 for the next 15 years, and $250,000 for the final 10 years. Plan B is a two-stage program: $450,000 is required now, followed by $50,000 at the end of 15 years. Annual maintenance will be $100,000 for the first 15 years and $125,000 for the subsequent years. At the end of 40 years, this plan has a salvage value of $150,000. Use a conventional benefit-cost ratio analysis to determine which plan should be chosen.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.