Determine the equivalent uniform annual cost

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Reference no: EM131806608

Jenny McCarthy is an engineer for a municipal power plant. The plant uses natural gas, which is currently provided from an existing pipeline at an annual cost of $10,000 per year. Jenny is considering a project to construct a new pipeline. The initial cost of the new pipeline would be $35,000, but it would reduce the annual cost to $5000 per year. Assume an analysis period of 20 years and no salvage value for either the existing or new pipeline. The interest rate is 6%.

(a) Determine the equivalent uniform annual cost (EUAC) for the new pipeline.

(b) Should the new pipeline be built?

Reference no: EM131806608

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