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A pipeline engineer working in Kuwait for the oil giant BP wants to perform a present worth analysis on alternative pipeline routings-the first predominately by land and the second primarily undersea. The undersea route is more expensive initially due to extra corrosion protection and installation costs, but cheaper security and maintenance reduces annual costs. Perform the analysis for the engineer at 15% per year.
Land
Undersea
Installation cost, $ million
215
350
Pumping, operating, security,
22
2
$ million per year
Replacement of valves and
30
70
appurtenances in year 25, $ million
Expected life, years
50
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