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The designer of the penstock for a small hydroelectric cogeneration station has the option of using steel pipe, which costs $150,000 installed and requires $5000
- The designer of the penstock for a small hydroelectric cogeneration station has the option of using steel pipe, which costs $150,000 installed and requires $5000 yearly for painting and leak-checking maintenance, or heavy-duty plastic pipe, which costs $180,000 installed and requires $1200 yearly for leak-checking maintenance. Both options have an expected life of 25 years. If the interest rate is 8%, which choice has the lower present equivalent cost and how much lower is it?
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