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. 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.

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. 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 m2 of capacity and then, 25 years later, the additional 80,000 m2 of capacity could be added by increasing the height of the reservoir. If the life of the reservoir is expected to be S0 years and the interest rate is 596, which construction plan is preferred? Compare using Present worth costs. Construction Cost Annual Maintenance Alternative 1 Build Full Capacity Now 200,000m 22,200,000 100,000 Alternative 2 First stage Now 120,000 m Second Stage at 25 yrs 80,000 m 14,200,000 12,600,000 $75,000 25,000 additional

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