n order to provide drinking water, a west coast city is considering constructing a mporting water from a nearby community that has a plentiful supply of brackish gi Two alternatives are: 1. A full-sized pipeline can be constructed at a cost of $105 million now. 2. Alternatively, a smaller pipeline can be constructed now for $85 million, an $25,000 per year for 20 years and salvage value $120 million. Both pipelines are expected to have the same useful life and MARR is 6%. Which a
n order to provide drinking water, a west coast city is considering constructing a mporting water from a nearby community that has a plentiful supply of brackish gi Two alternatives are: 1. A full-sized pipeline can be constructed at a cost of $105 million now. 2. Alternatively, a smaller pipeline can be constructed now for $85 million, an $25,000 per year for 20 years and salvage value $120 million. Both pipelines are expected to have the same useful life and MARR is 6%. Which a
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:In order to provide drinking water, a west coast city is considering constructing a pipeline for
importing water from a nearby community that has a plentiful supply of brackish ground water.
Two alternatives are:
1. A full-sized pipeline can be constructed at a cost of $105 million now.
2. Alternatively, a smaller pipeline can be constructed now for $85 million, annual cost of
$25,000 per year for 20 years and salvage value $120 million.
Both pipelines are expected to have the same useful life and MARR is 6%. Which alternative is
the best based on the PW analysis?
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