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ES3083 Exam#4 . An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500 meters away. The
ES3083 Exam#4 . An oil company is planning to install a new pipeline to connect storage tanks to a processing plant 1500 meters away. The connection will be needed for the foreseeable future. Both 180 mm and 120 mm pipes are being considered. (20 points) 180 mm pipe 120 mm pipe $3,500 8 years $2,500 8 years $300 $300 $1.40 600 hrs/year Initial cost Service life Salvage value Annual maintenance $200 Pump cost/hour Pump operation $400 $1.00 600 hrs/year For this analysis, the company will use an annual interest rate of 10%. Annual maintenance and pumping costs may be considered to be paid in their entireties at the end of the years in which their costs are incurred. (a) Disregarding the initial and replacement pipe costs, what is the capitalized cost of the maintenance and pumping costs for the 180 mm pipe? (b) What is the depreciation allowance for the 120 mm pipe in the first year? Use MACRS depreciation assuming a 5-year life
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