Two landfill construction plans are being considered by a planning committee. They are: 1) Plan A: Landfill with a groundwater protection system. 2) Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protect groundwater sources. Annual amortized capital costs and risks of failure for the systems are presented in the table below: Amortized (yearly) cost Estimated Annual Risk of failure [%] 1.50 0.015 Plan A Plan B Plan [$] 400,000 550,000 The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000. a) Determine the annual social cost of failure of each of the two plans. 120 b) Determine to total cost per year for the two plans. c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justify your choice.
Two landfill construction plans are being considered by a planning committee. They are: 1) Plan A: Landfill with a groundwater protection system. 2) Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protect groundwater sources. Annual amortized capital costs and risks of failure for the systems are presented in the table below: Amortized (yearly) cost Estimated Annual Risk of failure [%] 1.50 0.015 Plan A Plan B Plan [$] 400,000 550,000 The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000. a) Determine the annual social cost of failure of each of the two plans. 120 b) Determine to total cost per year for the two plans. c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justify your choice.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Two landfill construction plans are being considered by a planning committee.
They are:
1) Plan A: Landfill with a groundwater protection system.
2)
Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protect
groundwater sources.
Annual amortized capital costs and risks of failure for the systems are presented in the table below:
Amortized (yearly) cost Estimated Annual Risk of failure
[$]
Plan
[%]
Plan A
400,000
1.50
Plan B
550,000
0.015
The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000.
a) Determine the annual social cost of failure of each of the two plans.
1200
b) Determine to total cost per year for the two plans.
c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justify
your choice.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F388a9fab-648d-450d-a1a5-3932044f3fea%2F4e742539-ecfb-4e2b-9e82-35a12e64f343%2F14ghtpc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Two landfill construction plans are being considered by a planning committee.
They are:
1) Plan A: Landfill with a groundwater protection system.
2)
Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protect
groundwater sources.
Annual amortized capital costs and risks of failure for the systems are presented in the table below:
Amortized (yearly) cost Estimated Annual Risk of failure
[$]
Plan
[%]
Plan A
400,000
1.50
Plan B
550,000
0.015
The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000.
a) Determine the annual social cost of failure of each of the two plans.
1200
b) Determine to total cost per year for the two plans.
c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justify
your choice.
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