A consulting engineer has been engaged to advise a town how best to proceed with the construction of a 200,000 m3 water supply reservoir. Since only 120,000 m3 of storage will be required for the next 25 years, an alternative to building the full capacity now is to build the reservoir in two stages. Initially, the reservoir could be built with 120,000 m3 of capacity and then, 25 years hence, the additional 80,000 m3 of capacity could be added by increasing the height of the reservoir. Estimated costs are as follows:

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Annual Construction Maintenance Cost Cost in two stages 1 stage: 120,000 m? servoir $75,000 $14,200,000 ond stage: Add 80.000 m f capacity, additional onstruction and $12.600,000 $25,000 aaintenance costs $22,400,000 $100,000 full capacity now 1,000 m' reservoir