11 A large pipe network is constructed for the water supply needs of two areas at a costof €5,600,000. Additional one-off works are expected at the end of year 3 and year 6with costs of €80,000 and €100,000 respectively. The annual maintenance cost is€20,000 for the first 4 years and then €60,000 annually. Major repairs are neededevery 10 years (life cycle) at an additional cost of €500,000. Assuming a constantcompound interest rate of 9%,(a) Draw a cash flow diagram.(b) Calculate the total capitalized cost and annual worth for the construction andmaintenance of the pipe network.

Following is the summary of the cashflowsYear01234678910Amount € 56,00,000.00 € 80,000.00 €…

Answered: (a) Draw a cash flow diagram. (b)…

(a) Draw a cash flow diagram. (b) Calculate the total capitalized cost and annual worth for the construction and maintenance of the pipe network.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A large pipe network is constructed for the water supply needs of two areas at a cost
of €5,600,000. Additional one-off works are expected at the end of year 3 and year 6
with costs of €80,000 and €100,000 respectively. The annual maintenance cost is
€20,000 for the first 4 years and then €60,000 annually. Major repairs are needed
every 10 years (life cycle) at an additional cost of €500,000. Assuming a constant
compound interest rate of 9%,
(a) Draw a cash flow diagram.
(b) Calculate the total capitalized cost and annual worth for the construction and
maintenance of the pipe network.

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