1. IRRIGATIONCOSTESTIMATIONFORSF-WINERY

SF-Winery is exploring the most cost-effective option for its water supply requirements, consideringrecent unstable water supply. In this regard, two options (municipality supplied waterorboreholesupplied water) are available regarding the expected monthly average water requirements of 11 500kilolitres.UponinquiryfromMoraraWines,asimilarnearbywinery,SFwasabletoobtainMoraraWines'municipalinvoicesasshown below.

1. MUNICIPALITYSUPPLIEDWATER
   1. If themunicipality supplied wateroption is considered, SF will use Morara Wines' municipalinvoices as a base for estimating irrigation costs. However, the municipality is soon expected toapply a 6% annual inflationary increase on all its charges. Included in the total municipal chargesbelow are fixed refuse and sanitation charges of R3 750 per month. Morara's municipal invoicesreflectedthefollowing:

Municipal invoicemonth	Waterconsumption	Total municipalcharges
September	12500kilolitres	R65000
October	11280kilolitres	R59510
November	11300kilolitres	R57905
December	12350kilolitres	R65560

Withregardto"IrrigationcostestimationforSF-Winery":

(i)how do you Determinethe expected annual irrigation costs for each of the two given optionsandrecommendthemostfinanciallyviableoptionofthetwoforSF-Winery'swatersupply requirements. [the analysis should be based on the first year of operationonly].