year plan, a west coast city is considering constructing a pipeline for importing water from a nearby community that has a plentiful supply of brackish ground water. A full-sized pipeline can be constructed at a cost of $125 million now. Alternatively, a smaller pipeline can be constructed now for $65 million and enlarged 16 years from now for another $115 million. The pumping cost will be $25,000 per year higher for the smaller pipeline during the first 16 years, but it will be approximately the same thereafter. Both pipelines are expected to have the same useful life with no salvage value. At an interest rate of 6% per year, which alternative is more economical? The present worth of the full-sized pipeline is determined to be $ and that of the small-sized pipeline is $

year plan, a west coast city is considering constructing a pipeline for importing water from a nearby community that has a plentiful supply of brackish ground water. A full-sized pipeline can be constructed at a cost of $125 million now. Alternatively, a smaller pipeline can be constructed now for $65 million and enlarged 16 years from now for another $115 million. The pumping cost will be $25,000 per year higher for the smaller pipeline during the first 16 years, but it will be approximately the same thereafter. Both pipelines are expected to have the same useful life with no salvage value. At an interest rate of 6% per year, which alternative is more economical? The present worth of the full-sized pipeline is determined to be $ and that of the small-sized pipeline is $

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

Required information
In order to provide drinking water as part of its 50-
year plan, a west coast city is considering
constructing a pipeline for importing water from a
nearby community that has a plentiful supply of
brackish ground water. A full-sized pipeline can be
constructed at a cost of $125 million now.
Alternatively, a smaller pipeline can be constructed
now for $65 million and enlarged 16 years from now
for another $115 million. The pumping cost will
be $25,000 per year higher for the smaller pipeline
during the first 16 years, but it will be approximately
the same thereafter. Both pipelines are expected to
have the same useful life with no salvage value.
At an interest rate of 6% per year, which alternative is
more economical?
The present worth of the full-sized pipeline is determined to be $
and that of the small-sized pipeline is $
pipeline is the most economical pipeline.
The small

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