Gravity Pumping $2,500,000 $1,250,000 150,000 Initial investment Investment in 10th year Operation, maintenance, replacements, per |уear 12,500 20,000 Average annual power cost First 10 years 40,000 75,000 Next 25 years
Gravity Pumping $2,500,000 $1,250,000 150,000 Initial investment Investment in 10th year Operation, maintenance, replacements, per |уear 12,500 20,000 Average annual power cost First 10 years 40,000 75,000 Next 25 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
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 10 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 2 miles of pipeline. The pumping plant can be built in two stages: half now and half 10 years later Annual benefits are $190,00 for both plans. Use a 35-year analysis period and 6% interest. Salvage values can be ignored. Use the conventional benefit–cost ratio method to select the more economical plan.

Transcribed Image Text:Gravity
Pumping
$2,500,000 $1,250,000
150,000
Initial investment
Investment in 10th year
Operation, maintenance, replacements, per
|уear
12,500
20,000
Average annual power cost
First 10 years
40,000
75,000
Next 25 years
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