Two alternative water purification systems are considered to meet the drinking water needs in Canada. The data of the two alternatives are given in the table below. If the interest is 12% compound, which alternative would be appropriate using the annual equivalent (AE) method?

Two alternative water purification systems are considered to meet the drinking water needs in Canada. The data of the two alternatives are given in the table below. If the interest is 12% compound, which alternative would be appropriate using the annual equivalent (AE) method?

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

Economics
Two alternative water purification systems are
considered to meet the drinking water needs in
Canada. The data of the two alternatives are given
in the table below. If the interest is 12% compound,
which alternative would be appropriate using the
annual equivalent (AE) method?
System 1
System 2
System 3
initial investment cost
-100
-60
-1000
monthly cost
-10
-12
-8
maintenance costs
-50 Once in two years -30 once in a year
No
scrap value
economic life (years)
10
8 no
4
3 infinity

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