The town of Melville needs to obtain an additional supply of water from a nearby river. They have beenoffered two options: diverting water at a point 8 miles upstream and allowing gravity to move the water to thetown (the "gravity" plan), or diverting water at a point much closer to the town and using pumps to move thewater to the town (the "pumping" plan). The pumping plan would be built in two stages, with half of itscapacity installed initially and the other half installed ten years later. For both options, the town wants to usea 40-year life, 10% interest, and no salvage value. The projected costs are in the table below:Initial CostAdditional investment at the end ofthe 10th yearAnnual Operation and Maintenance,excluding PowerAnnual Power CostGravity$2,800,000None$10,000$25,000$75,000Use an Annual Worth analysis to determine the most economical plan for the town.PumpingNone$1,400,000$200,000

In Annual worth analysis we try to find out equivalent annual cost of all cost and then see the…

Answered: The town of Melville needs to obtain an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The city council wants the municipal engineer to evaluate three alternatives for supplementing the city water supply. The first alternative is to continue deepwell pumping at an annual cost of $10,500. The second alternative is to install an 18-inch pipeline from a surface reservoir. First cost is $25,000 and annual pumping cost is $7000. The third alternative is to install a 24-inch pipeline from the reservoir at a first cost of $34,000 and annual pumping cost of $5000. The life of each alternative is 20 years. For the second and third alternatives, salvage value is 10% of first cost. With interest at 8%, which alternative should the engineer recommend? Use present worth analysis.
A new storm drainage system must be constructed right away to reduce periodic flooding that occurs in a city that is in a valley. Five mutually exclusive designs have been proposed, and their present worth (in thousands of dollars) of costs and benefits are the following. Solve, a. Which system has the greatest B–C ratio? b. Which system has the largest incremental B–C ratio(based on differences between alternatives)? c. Which system should be chosen ?
The Highridge 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. Pumping plan: Divert water at a point near the district and pump it through 2 miles of pipeline. The pumping plant can be built in two stages: half now and half 10 years later Annual benefits are $190,00 for both plans. Use a 35-year analysis period and 6% interest. Salvage values can be ignored. Use the conventional benefit–cost ratio method to select the more economical plan.
The Army Corps of Engineers wants to construct a dam on a flood-prone river. The estimated construction cost and average annual dollar benefits are listed below. A 6% per year rate applies and dam life is infinite for analysis purposes. (a) Select the one best location using the B/C method. (b) If the sites are now considered independent projects, which sites are acceptable?
The city of San Fernando contemplates to increase the capacity of her existing water transmission lines. Two plans are under consideration. plan a requires the construction of a parallel pipeline , the flow being maintained by gravity. The initial cost is 2,750,000 and the life is 40 years, with an annual operating cost of 5,000. Plan B requires the construction of a booster pumping station costing 1,050,000 with the life of 40 years. The pumping equipment cost an additional amount of 250,000. It has a life of 20 years and a salvage value of 25,000. The annual operating cost is 165,000. Which is the most economical plan if the interest rate is 12% and how much is the difference between the two plans. Use Present worth Method.
A consulting engineer is considering two methods for lining landfill for municipal solid waste management in Bannock County, Idaho. A geosynthetic bentonite clay liner (GCL) will cost $2.0 million to install, and if it is renovated after 4 years at a cost of $400,000, its life can be extended another 2 years. Alternatively, a high-density polyethylene (HDPE) geomembrane can be installed that will have a useful life of 12 years. At an interest rate of 6% per year, how much money can be spent on the HDPE liner for the two methods to break even?
A municipal engineer is evaluating two alternatives for adding capacity to the water supply system for the city. The first alternative is a dam with a cost of $80,000,000.00 that will require operating and maintenances costs of $250,000.00 per year. The dam will have an infinite life. The second alternative under consideration is a pipeline to transport water from a nearby lake. The pipeline costs $4,500,000.00, it will last five years, and it has operating and maintenance costs of $500,000.00 per year. Using an interest rate of 5%, which alterna- tive should be selected by the city based on capitalized cost?
The town of Dry Gulch needs more water from Pine Creek. The townengineer has selected two plans for comparison: a gravity plan (divertwater at a point 10 miles up Pine Creek and pipe it by gravity to thetown) and a pumping plan (divert water at a point closer to town).The pumping plant would be built in two stages, with half-capacityinstalled initially and the other half installed 10 years later. Use an annual cash flow analysis to find which plan is more economical. The analysis will assume a 40-year life, 10% interest, and no salvage value Gravity Pumping Initial investment $ 2,800,000 $ 1,400,000 Investment in 10th year None $ 200,000 Operation and maintenance $ 10,000/yr $ 25,000/yr Power cost Average first 10 years None $ 50,000/yr Average first 30 years None $ 100,000/yr
Two landfill construction plans are being considered by a planning committee.They are:1) Plan A: Landfill with a groundwater protection system.2) Plan B: Landfill constructed with a geosynthetic liner to minimize leachates from the landfill and protectgroundwater sources.Annual amortized capital costs and risks of failure for the systems are presented in the table below:The cleanup cost, if the groundwater system should fail, is estimated to be $8,000,000.a) Determine the annual social cost of failure of each of the two plans.b) Determine to total cost per year for the two plans.c) If minimum total annual cost is the criterion for selecting a option, what plan should be chosen? Clearly justifyyour choice.
The Government is considering a multi-purpose river valley project in which would involve construction of a dam, a reservoir, a power house, and several irrigation canals. The project would supply water for irrigation, generate electricity, and provide a measure of protection against floods. The following information has been gathered by the project control board. The project will require the following during the construction stage: i) locally produced power equipment costing Ks 200 million; ii) imported power equipment costing $ 10 million; iii) 20,000 tonnes of steel produced locally and made available to the project at Ks 6000 a tonne; iv) 350,000 tonnes of cement produced locally and made available to the project at Ks 800 a tonne; v) other construction materials (sand, bricks, ballast, etc.) costing Ks 100 million; vi) 25 million man-days of unskilled labour for which the project control board has decided to pay a daily wage rate of Ks 10; and vii) skilled labour costing Ks…
A new storm drainage system must be constructed right away to reduce periodic flooding that occurs in a city that is in a valley. Five mutually exclusive designs have been proposed, and their present worth (in thousands of dollars) of costs and benefits are the following. a. Which system has the greatest B-C ratio? b. Which system has the largest incremental B-C ratio (based on differences between alternatives)? c. Which system should be chosen? System 1 2 3 4 5 PW of $800 $5,000 $5,000 $12,000 $11,000 costs PW of 6,000 14,000 6,000 22,000 18,000 benefits a. System v has the greatest B-C ratio, which is (Round to two decimal places.)
The city of Zamboanga contemplates to increase the capacity of their existing water transmission lines. Two plans are under considerations. Plan A requires the construction of a parallel pipeline, the flow being maintained by gravity. The initial costs is P2, 750, 000.00 and the life is 40 years, with an annual operating cost of P5, 000.00. Plan B requires the construction of a booster pumping stations coating P1, 050, 000.00 with the life of 40 years. The pumping equipment cost an additional amount of P250, 000.00, it has a life of 20 years and a salvage value of P25, 000. The annual operating costs is P165, 000.00. Which is the most economical plan if the interest rate is 12% and how much is the difference between the two plans. Use present worth method.

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS