**Problem 16-27**A 50-meter tunnel must be constructed for a new city aqueduct. There are two alternatives:1. **Full-Capacity Tunnel:** - Cost: $500,000 now.2. **Half-Capacity Tunnels:** - First half-capacity tunnel cost: $300,000 now. - Second parallel half-capacity tunnel built 20 years later: $300,000.**Reline Costs:**- Full-capacity tunnel: $20,000 every ten years.- Half-capacity tunnels: $16,000 each, every ten years.**Objective:**Determine whether the full-capacity or half-capacity tunnel should be constructed. Use conventional benefit-cost ratio analysis with:- 4% interest rate.- 50-year analysis period.- Note: No reline will be required at year 50.

Full-capacity tunnel Alternative- 1: Computation of total as on today Cost of the project as on…

now for $300,000, and then build a second parallel half-capacity tu $300,000. Each tunnel must be relined every ten years, at a cost of tunnel and $16,000 each for the half-capacity tunnels. Determine whether the full-capacity tunnel or the half capacity tun now. Solve the problem using conventional benefit-cost ratio analy an 50-year analysis period. No reline will be required at year 50.

now for $300,000, and then build a second parallel half-capacity tu $300,000. Each tunnel must be relined every ten years, at a cost of tunnel and $16,000 each for the half-capacity tunnels. Determine whether the full-capacity tunnel or the half capacity tun now. Solve the problem using conventional benefit-cost ratio analy an 50-year analysis period. No reline will be required at year 50.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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