Question

1. A new pipeline is installed.  Annual maintenance and pumping costs are considered to be paid in their entireties at the end of the years in which their costs are incurred (assume that maintenance happens in year 10).  The pipe has the following costs and properties:

Initial cost                         $7,500

Annual interest rate          5% Service life                        10 years Salvage value                    $500

Annual maintenance         $500

Pump cost/hour                 $2.75

Pump operation                 2000 hours/year

What is the equivalent uniform annual cost (EUAC) of the pipe?

Answer 1

Initial Cost	7500
Salvage Value	500
PV @ 5% for 10th Year	0.6139133
PV of Salvage Value	306.95663
Annual Maintenance Cost	500
Annual Pump Operation Cost	5500
Total Annual Cost	6000
PVIFA @ 5% for 10 Years	7.7217
PV of Annual Costs	46,330.41
Present Value on net Cost (A)-(B)+(C)	53,523.45
PVIFA @ 5% for 10 Years	7.7217
equivalent uniform annual cost	6,931.53