A wastewater treatment plant must be built to improve water quality on a stream. Two options are available: a secondary treatment plant removing 85% of the pollution or a tertiary treatment plant removing 95% of the pollution. Improved water quality is given a dollar value as shown in the table. Assume that, by law, the planning horizon (analysis period) is 20 years. The MARR is 8%. Determine the best plant Lo build using the method listed below.
| Secondary ($ million) | Tertiary ($ million) |
Initial cost | 20.0 | 40.0 |
Annual operating cost | 1.0 | 2.0 |
Annual benefit | 3.5 | 7.0 |
Lifetime (years) | 20 | 20 |
(a) Form the cash flow table for the alternatives showing the correct sign for all entries. Also show the incremental cash flow column (T-S).
(b) Solve using present worth analysis.
(c) Solve using annual cash flow analysis
(d) Solve using incremental benefit-cost ratio analysis
(e) Solve using incremental rate of return analysis, assuming that each alternative has a satisfactory internal rate of return
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