1. In a developing country, two alternatives are under consideration for delivering water from a mountainous area to an arid area in the country’s southern region. A coated heavy-gauge plastic pipeline can be installed, with pumps spaced appropriately along the pipeline. Alternatively, a canal can be built;

however, it will have greater water loss than the pipeline, due to evaporation and poaching along the canal route. To compensate for the water loss, the canal will have a greater carrying capacity than the pipeline.

It is estimated it will cost $125 million to install the pipeline. Major replacements are planned every 15 years at a cost of $10 million. Pumping and other annual operating and maintenance costs are estimated to be

$5 million.

The canal will cost $200 million to construct; its annual operating and maintenance costs are anticipated to be $1 million. Major upgrades of the canal are anticipated every 10 years, at a cost of $5 million.
Based on a 5 percent MARR and an infi nitely long planning horizon, which alternative has the lowest capitalized cost?

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Given: Initial Cost Annual O&M Pipeline $125 million $5 million Canal $200 million $1 million Major $10 million every 15 years $5 million every 10 years Find: Capitalized Cost (CC) of each alternative