The High ridge Water District needs an additional supply of water from Steep Creek. The engineer has selected two plans for comparison: Gravity plan: Divert water at a point 10 miles up Steep Creek and carry it through a pipeline by gravity to the district. Pumping plan: Divert water at a point near the district and pump it through 2 miles of pipeline to the district. The pumping plant can be built in two stages, with half-capacity installed initially and the other half 10 years later. Use a 40-year analysis period and 8% interest.

Salvage values can be ignored. During the first 10 years, the average use of water will be less than during the remaining 30 years. Use the conventional benefit-cost ratio method to select the more economical plan.

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Pumping Gravity $2,800,000 $1,400.000 Intial investment 200,000 Additional investment in tenth year Operation, maintenance, replacements, per year Average power cost per ycar (first 10 years) Average power cost per year (next 30 years) 10,000 25,000 50,000 100,000