A city is planning a new pipeline to supply water from distant mountains. The planning horizon chosen is 50 years, and the city uses an interest rate of 7%. For $250 million, the city to build a pipeline now that would supply the need for 50 years, as if would build the project in two stages: $150 million now $200 million in year 25. Annual operating and maintenance for the first two-stage project is $3.0 million through. Year 25 followed by $6.0 million for the combined first and second stage project after Year 25 and through Year 50.
(a) Form the cash flow table for the two alternatives and the increment investment, showing the correct signs for all entries,
(b) Using present worth analysis, determine the best project,
(c) Using annual cash flow analysis, determine the best project.
(d) Using incremental rate of return analysis, determine the best project. Check at the MARR only; do not try to find the incremental ROR itself.
(e) Using incremental benefit-cost ratio analysis, determine the best project
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