Question
Solve using EXCEL The city of Flint, Arizona needs a new water delivery system from a lake. The two options proposed by the city engineers
Solve using EXCEL
The city of Flint, Arizona needs a new water delivery system from a lake. The two options proposed by the city engineers are the following. Given the pace of remediation, the city assumes that this delivery system is not going to be too temporary a fix.
- Option one is a water delivery system using the laws of nature and ingenuity of its designers, similar to the one in Maui. The initial investment is estimated at $3.5 million. The canals need annual maintenance, estimated at $15,000. The water transport system lasts 30 years.
- Option two is a similar pipeline system used to transport water from neighboring states to California. The initial investment is estimated at $2.5 million. The power cost is estimated to be $30,000 for the first year of operation with a 6.5% increase in the following years. At year 8, an overhaul of $200,000 is expected. The pipeline is expected to last 20 years. The annual operation and maintenance are estimated to cost the city an extra $25,000.
You were hired by the city council to audit the proposed plans and make a recommendation. After your inquiry, you learned that the city's MARR is 5.5%.
Q1
Being a fantastic engineer with an excellent record in project finance appraisals, you decided to perform a(n) (choose one)
"Net Present Value Analysis (NPV)"
"Annual Cash Flow Analysis (EUAW)"
"Rate of Return Analysis (IRR)"
to minimize the amount of calculation.
Q2
According to the analysis method that you wisely selected which is supposed to minimize the calculation, the cost of option one is
"$3,718,006 total present cost"
"$255,819 per year"
"$4,464,002 total present cost"
"$4,651,252 total present cost"
and that of option two is
"$3,552,045 total present cost"
"$297,233 annual cost"
"$5,186,668 total present cost"
"$5,404,232 total present cost"
Q3
Your recommendation to the city council is
"Option One (Maui)"
"Option Two (California)" .
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