**Analysis of Water Supply Options for Highridge Water District**The Highridge Water District requires additional water supply from Steep Creek. Two potential plans have been proposed for comparison:1. **Gravity Plan**: This plan involves diverting water at a point ten miles up Steep Creek and transporting it via a pipeline using gravity.2. **Pumping Plan**: This plan involves diverting water near the district and pumping it through a two-mile pipeline. The pumping plant construction can occur in two stages: half initially and the remaining half ten years later.**Cost Comparison Table**| Alternative | Gravity | Pumping ||-------------|---------|---------|| Initial Investment | $2,500,000 | $1,250,000 || Investment at End of Year 10 | - | $150,000 || O&M Cost/Year | $12,500 | $20,000 |**Average Annual Power Cost**- **Gravity Plan**: - Years 1-10: - - Years 11-35: -- **Pumping Plan**: - Years 1-10: $40,000 - Years 11-35: $75,000Both alternatives offer annual benefits of $190,000 with an analysis period of 35 years. Residual values are to be disregarded in this analysis.**Decision Criteria**The decision should be made using a conventional benefit-cost analysis between these alternatives, as doing nothing is not an option.

Benefit Cost Ratio is defined as the metric used in finance that helps in the assessment of…

4 The Highridge Water District needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison: Gravity plan: Divert water at a point ten miles up Steep Creek and carry it through a pipeline by gravity. Pumping plan: Divert water at a point near the district and pump it through two miles of pipeline. The pumping plant can be built in two stages, half now and half ten years hence. Alternative Gravity Pumping Initial investment 2,500,000 1,250,000 Investment at end of year 10 O&M cost/year Average annual power cost: 150,000 12,500 20,000 Years 1-10 40,000 Years 11-35 75,000 Annual benefits for each alternative are $190,000/year. Analysis period is 35 years. Disregard residual values. Choose between these alternatives using conventional benefit-cost analysis. Doing nothing is not an option here.

4 The Highridge Water District needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison: Gravity plan: Divert water at a point ten miles up Steep Creek and carry it through a pipeline by gravity. Pumping plan: Divert water at a point near the district and pump it through two miles of pipeline. The pumping plant can be built in two stages, half now and half ten years hence. Alternative Gravity Pumping Initial investment 2,500,000 1,250,000 Investment at end of year 10 O&M cost/year Average annual power cost: 150,000 12,500 20,000 Years 1-10 40,000 Years 11-35 75,000 Annual benefits for each alternative are $190,000/year. Analysis period is 35 years. Disregard residual values. Choose between these alternatives using conventional benefit-cost analysis. Doing nothing is not an option here.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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