Alternatives using conventional benefit-cost analysis

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Reference no: EM133067025

The Highridge Water District needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison:

Gravity plan: Divert water at a point ten miles up Steep Creek and carry it through a pipeline by gravity. 

Pumping plan: Divert water at a point near the district and pump it through two miles of pipeline. The pumping plant can be built in two stages, half now and half ten years hence.

Alternative

Gravity

Pumping

Initial investment

2,500,000

1,250,000

Investment at end of year 10

-

150,000

O&M cost/year

12,500

20,000

Average annual power cost:

 

 

Years 1-10

 

40,000

Years 11-35

 

75,000

Annual benefits for each alternative are $190,000/year. Analysis period is 35 years. Disregard residual values.

Choose between these alternatives using conventional benefit-cost analysis. Doing nothing is not an option here.

Reference no: EM133067025

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