Which should be built at an interest rate of per year

Reference no: EM13245150

Two large-scale conduits are under consideration by a large municipal utility district (MUD). The first involves construction of a steel pipeline at a cost of $225 million. Portions of the pipeline will have to be replaced every 40 years at a cost of $50 million.
The pumping and other operating costs are expected to be $10 million per year. Alternatively, a gravity flow canal can be constructed at a cost of $350 million. The M&O costs for the canal are expected to be $0.5 million per year. If both conduits are expected to last forever,
which should be built at an interest rate of 10% per year?

Reference no: EM13245150

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