Question
The oil company located near Germany wants to install a new pipeline to connect a storage tank to an existing pump 1,000 feet away. Three
The oil company located near Germany wants to install a new pipeline to connect a storage tank to an existing pump 1,000 feet away. Three possible diameters are being considered to make the pipeline, the related costs of which are presented below:
The company is presumed to apply a 10% interest rate on its projects. Both maintenance and the annual cost of pumping are considered as expenses that occur at the end of the year (conventional flows).
For what number of pumping hours per year will the 4 and 6 inch pipelines be equally economical?
You must show in detail how you got your result. It is important that you submit the relevant evidence (cash flow equations, Excel, photo, etc.) in the link provided by this question for correction.
Pipeline diameter | 4 pulg. | 6 pulg. | 8 pulg. |
Initial cost | $2,000 | $3,000 | $4,000 |
Maintenance cost / year | 600 | 500 | 400 |
Cost of pumping per hour | 2.70 | 1.30 | 1.00 |
Residual value | 100 | 150 | 300 |
Useful life (years) | 10 | 10 | 10 |
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