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Problem 3 (6 Marks) State farm well services is considering two sites for storage of water. The first site (MS) cost to construct is $4.5
Problem 3 (6 Marks) State farm well services is considering two sites for storage of water. The first site (MS) cost to construct is $4.5 millions and $300,000 per year for M&O costs. This site will be able to accommodate 150 million gallons each year (Benefit). The second site (VS) cost to construct is $11 million and $400,000 to operate and maintain. At this site, 890 million gallons can be accommodated each year (Benefit). If the value of the accommodated water is $3 per 1000 gallons, which alternative should be selected according to the BIC ratio method? Use an interest rate of 10% per year and a 20-year study period
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