Two possible routes for a power line are under study. Data on the routes are as follows:
Around the Lake Under the Lake
Length 15 km 5km
First cost $5000/km $25,000/km
Maintenance $200/km/yr $400/km/yr
Useful life, in years 15 15
Salvage value $3000/km $5000/km
Yearly power loss $500/km $500/km
Annual property taxes 2% of first cost 2% of first cost
If 7% interest is used, should the power line be routed around the lake or under the lake?