The District of Columbia wants the City Engineer to evaluate three (3) alternatives for supplementing the Citys water supply as follows:

? Alternative 1: Continue deep well pumping at an annual cost of $10,500.

? Alternative 2: Install an eighteen (18) inch diameter pipe from the surface reservoir.

The initial cost for this is $25,000, with an annual pumping cost of $7,000. ? Alternative 3: Install a twenty-four (24) inch diameter pipe from the surface reservoir. The initial cost for this is $34,000, with an annual pumping cost of $5,000. Assumptions: MARR = 8%. Economic life = 20-years. Alternatives 2 and 3 salvage value = 10% of initial cost. Each Alternative is equally effective in meeting the District of Columbias increased water needs. Determine which alternative the City Engineer should recommend.