Question

10) An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500 m away. A 120 mm pipe is being considered with the following characteristics. What is the benefit-cost ratio for this pipe using an annual interest rate of 10 %? Initial cost $2500 12 Years $300 $300 $1.40 600 hours/year $2000/year Service Life Salvage Value Annual Maintenance Pump Cost/Hour Pump Operation Estimated Benefits a. 1.22 b. 1.34 c. 1.45 d. 2.10

Answer 1

Answer will be the 1.34.

BCR = Benefit / Cost

P = $2500 + ($300)(P/A, 10%, 12) +(1.40 hot) (600 hours X (P/A, 10%, 12) - ($300) (P/F, 10%, 12) = $2500+ ($300 + $840)(6.8137) -($300 (0.3186) = $10.172 ($10,200)