The town of Dry Gulch needs an additional supply of water from Pine Creek. The town engineer has selected two plans for comparison: a gravity plan (diverts water at a point 10 miles up Pine Creek and carry it through a pipeline by gravity to the town) and a pumping plan (diverts water at a point closer to the town and pumps it to the town). The pumping plant would be built in two stages, with half-capacity installed initially and the other half installed 10 years later.
An analysis will assume a 40-year life, 10% interest, and no salvage value. Costs are as follows:

Use an annual cash flow analysis to determine the more economical plan.

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Initial investment Additional investment in Gravity Pumping $2.800.000 1.400.000 200,000 None 0th year Operation and maintenance 0,000/yr 25,000lyr Power cos Average fitsi 10 years Average next 30 years None 50,000 yr None 00,000yr