Two alternatives are being considered for a water resources project. Alternative A has a project lifetime of 40 years. Alternative B has a project lifetime of 30 years. The timeseries of benefits and costs for the projects are provided below. Find the equivalent. present value and equivalent annual value for each project, assuming an 8% interest rate. Which project is preferred from an economic perspective? Alternative Year 10 A B 50 40 Alternative Year 10 A B 10 35 Benefits ($ million) Year 20 Year 30 Year 10 0 10 20 Costs ($ Year 20 0 0 20 15 million) Year 30 10 5 Year 10 0

Two alternatives are being considered for a water resources project. Alternative A has a project lifetime of 40 years. Alternative B has a project lifetime of 30 years. The timeseries of benefits and costs for the projects are provided below. Find the equivalent. present value and equivalent annual value for each project, assuming an 8% interest rate. Which project is preferred from an economic perspective? Alternative Year 10 A B 50 40 Alternative Year 10 A B 10 35 Benefits ($ million) Year 20 Year 30 Year 10 0 10 20 Costs ($ Year 20 0 0 20 15 million) Year 30 10 5 Year 10 0

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

Two alternatives are being considered for a water resources project. Alternative A has
a project lifetime of 40 years. Alternative B has a project lifetime of 30 years. The
timeseries of benefits and costs for the projects are provided below. Find the equivalent
present value and equivalent annual value for each project, assuming an 8% interest
rate. Which project is preferred from an economic perspective?
Alternative Year 10
A
B
Alternative
A
B
50
40
Year 10
40
35
Benefits ($ million)
Year 20 Year 30 Year 40
10
20
0
20
15
Costs ($ million)
Year 20 Year 30 Year 40
0
0
0
10
5

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