Bonus Problem (Extra credit, 5 pts) This is a Fundamentals of Engineering (FE) e

Question

Bonus Problem (Extra credit, 5 pts) This is a Fundamentals of Engineering (FE) exam style problem. The following new pipeline is planned to be installed. The annual maintenance and pumping costs are considered to be paid in their entireties at the end of the years in which their costs are incurred. The pipe has the following costs and properties. The market interest rate is 8%. AMOUNT $3350 $750 50 years ITEM INITIAL COST ANNUAL MAINTENANCE COSTS SERVICE LIFE SALVAGE VALUE $125 $10.75 3000 hours/year PUMP COST/HOUR PUMP OPERATION What is the annual equivalent cost of the pipe?

Explanation / Answer

Annual equivalent cost = NPV / total of annuity factor (PVAF)

pvf = 1/(1+r)^n

pvaf = 1-(1+r)-n / n

annual equivalent cost = 407036/12.233
=33273 .6

ANNUAL COST Annual maintanance cost 750 add pump cost 32250 (pumping operation hour per year * per hour pump cost) (3000*10.75) annual cost 33000

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