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
icon
Related questions
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.

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
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
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 4 images

Blurred answer
Knowledge Booster
Cost control
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education