pter 5&6 HW Help Save& Exit 2 Required information In order to provide drinking
ID: 2618082 • Letter: P
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pter 5&6 HW Help Save& Exit 2 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 t 1 of 2 be constructed at a cost of $110 million now. Alternatively, a smaller pipeline can be constructed now for $ and enlarged 19 years from now for another $100 million. The pumping cost will be $25,000 per year higher for the smaller pipeline during the first 19 years, but it will be approximately the same thereafter. Both pipelines are expected to have the same useful life with no salvage value. eBook Hint At an interest rate of 10% per year, which alternative is more economical? The present worth of the ful-sized pipeline is determined to beand that of the smal-sized pipeline is $ The (Cick to select) pipeline is the most economical pipeline. and that of the small-sized pipeline is $Explanation / Answer
Present value of full sized pipe line is $110 Million and that of small sized pipeline is $96.56 Million
The small sized pipeline is most economical pipeline.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Cash outflow $ 80,000,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 25,000.00 $ 100,025,000.00 Present Value $ 80,000,000.00 $ 22,727.27 $ 20,661.16 $ 18,782.87 $ 17,075.34 $ 15,523.03 $ 14,111.85 $ 12,828.95 $ 11,662.68 $ 10,602.44 $ 9,638.58 $ 8,762.35 $ 7,965.77 $ 7,241.61 $ 6,583.28 $ 5,984.80 $ 5,440.73 $ 4,946.12 $ 4,496.47 $ 16,354,886.78 Net Present Value $ 96,559,922.08Related Questions
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