6-41: The town of Dry Gulch needs more water from Pine Creek. The town engineer
ID: 1234571 • Letter: 6
Question
6-41: The town of Dry Gulch needs more water from Pine Creek. The town engineer has selected two plans for comparison: a gravity plan (divert water at a point 10 miles up Pine Creek and pipe it by gravity to the town) and a pumping plan (divert water at a point closer to town). The pumping plant would be built in two stages, with half-capacity installed initially and the other half installed 10 years later.The analysis will assume a 40-year life, 10% interest, and no salvage value. Use an annual cash flow analysis to find which plan is more economical.
Gravity Pumping
Initial Investment $2,800,000 $1,400,000
Additional Investment in None 200,000
10th year
Operation and Maintenance 10,000/yr 25,000/yr
Power Cost
Average first 10 years None 50,000/yr
Average next 30 years None 100,000/yr
Explanation / Answer
Use EUAC Comparison
Gravity Plan
Initial Investment: = $2.8 million (A/P, 10%, 40)= $2.8 million (0.1023) = $286,400
Annual Operation and maintenance = $10,000
Annual Cost = $296,400
Pumping Plan
Initial Investment: = $1.4 million (A/P, 10%, 20)= $1.4 million (0.1023) = $143,200
Additional investment in 10th year:
= $200,000 (P/F, 10%, 10) (A/P, 10%, 40)= $200,000 (0.3855) (0.1023) = $7,890
Annual Operation and maintenance = $25,000
Power Cost: = $50,000 for 40 years = $50,000
Additional Power Cost in last 30 years: = $50,000 (F/A, 10%, 30) (A/F, 10%, 40)
= $50,000 (164.494) (0.00226) = $18,590
Annual Cost = $244,680
Select the Pumping Plan.
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