2. Problem 2 The Highridge region needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison: Gravity plan. Divert water at a point 10 km upstream on Steep Creek and carry it through a pipeline by gravity to the district. Pumping plan. Divert water at a point on Steep Creek that is nearer to the district, and pump it through 2 km of pipelines to the district. The pumping plant can be built in two stages, with the building, infrastructure, and one pump (half-capacity) installed initially, and the other pump (other half of capacity) installed 10 years later. Initial investment Gravity $2,600,000 Pumping $1,400,000 Investment in 10th year 0 300,000 Operation, maintenance, 10,000 25,000 replacements, per year Average annual power cost, first 10 years 0 70,000 next 30 years 0 110,000 Average annual benefits First 20 years $200,000 $200,000 Next 20 years $400,000 $400,000 Use a 40-year analysis period and 7% interest. Assume no salvage values. Which plan is better, applying the conventional benefit-cost ratio method? Calculate B/C ratios to the hundredths place, and recommend which plan is better.