Two alternate plans are available for increasing the capacity of existing water transmission lines between an unlimited source and a reservoir. The unlimited source is at a higher elevation than the reservoir. Plan A calls for the construction of a parallel pipeline and for flow by gravity. Plan B specifies construction of a booster pumping station. Estimated cost data for the two plans are as follows:
Two alternate plans are available for increasing the capacity of existing water transmission lines between an unlimited source and a reservoir. The unlimited source is at a higher elevation than the reservoir. Plan A calls for the construction of a parallel pipeline and for flow by gravity. Plan B specifies construction of a booster pumping station. Estimated cost data for the two plans are as follows:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Two alternate plans are available for increasing the capacity of existing water transmission lines
between an unlimited source and a reservoir. The unlimited source is at a higher elevation than the
reservoir. Plan A calls for the construction of a parallel pipeline and for flow by gravity. Plan B
specifies construction of a booster pumping station. Estimated cost data for the two plans are as
follows:
Plan A
Plan B
Pipeline
Pumping Station
$200,000
40 years (structure)
20 years (equipment)
Construction cost
$1,000,000
40 years
Life
Cost of replacing
equipment at the
end of 20 yr
Operating costs
$75,000
$50,000/yr
$1000/yr
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