ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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A city has developed a plan to provide for future municipal water needs. The plan proposes

an aqueduct that passes through 150 meters of tunnel in a nearby mountain. Two

alternatives are being considered. The first proposes to build a full-capacity tunnel now for

$556 000. The second proposes to build a half capacity tunnel now and a second identical

half-capacity tunnel in 20 years. Each of half capacity tunnel costs $402 000. The

maintenance cost of the tunnel lining for the full-capacity tunnel is $40 000 every 10 years,

and for each half-capacity tunnel it is $32 000 every 10 years.

The friction losses in the half-capacity tunnel will be greater than if the full-capacity tunnel

were built. The estimated additional pumping costs for each half-capacity tunnel will be

$2 000 per year. Using present worth method and a 7% interest rate, which alternative

should be selected?

Give typing answer with explanation and conclusion 

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