A university pumps its water from wells located on campus. The falling water table has caused pumping costs to increase, the quantity of water available to decrease, and the quality of water to deteriorate. A public water company now has a large water main that runs within a few hundred yards of the university's pumping station. The university has decided to build a pipeline connecting to the company's water main and purchase water for the school. Two alternative types of pipe are being considered to supply the needs for a 60-year period. The relevant data is shown below:

Using a 60-year study period, recommend a pipe alternative based on an internal rate of return analysis. Since the university is tax exempt, it uses a MARR of 6 percent/year. Assume a zero net terminal salvage value for the pipe and the pumping equipment, and assume that renewal costs during the 60-year period will be the same as the initial costs.

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Initial Investment in Pipe Estimated Pipe Life Initial Investment in Pumping Equipment Estimated Life of Pumping Equipment Annual Maintenance and Energy Costs Pipe A $120,000 60 years $15,000 20 years $3,000 Pipe B $80,000 30 years $20,000 20 years $4,000