The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river. 1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000. 2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a$12,000 damage. 3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all. In any year, there is a 21% probability of moderate flooding and a 10% probability of severe flooding. Using a MARR of 8% per year and a service life of 12 years, determine which of the three alternatives is the most economical. (a) Calculate EUAC values for each scenario (use negative numbers for costs) The expected EUAC for the "Do Nothing" alternative is (Round to the nearest whole number.) The expected EUAC for Alternative 2 is (Round to the nearest whole number.) The EUAC for Alternative 3 is (Round to the nearest whole number. (b) The most economical alternative is A. Do nothing B . Alternative 2 C Alternative 3

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following three mutually exclusive alternative proposals are being considered for flood proofing a factory building that is located in an area subject to occasional flooding by a nearby river.

1. Do nothing: Damage to the building in a moderate flood is $11,000 and in a severe flood it is $24,000.

2. Protect the building with a one-time initial expenditure of $20,000 so that the building can withstand moderate flooding without any damage and withstand severe flooding with only a$12,000 damage.

3. Protect the building with a one-time initial expenditure of $32,000 so that the building can withstand any flooding with no damage at all.

In any year, there is a 21% probability of moderate flooding and a 10% probability of severe flooding. Using a MARR of 8% per year and a service life of 12 years, determine which of the three alternatives is the most economical.

(a) Calculate EUAC values for each scenario (use negative numbers for costs)

The expected EUAC for the "Do Nothing" alternative is (Round to the nearest whole number.)

The expected EUAC for Alternative 2 is (Round to the nearest whole number.)

The EUAC for Alternative 3 is (Round to the nearest whole number.

(b) The most economical alternative is

A. Do nothing

B . Alternative 2

C Alternative 3

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