A large municipal utility district is considering two large-scale conduits. The first involves construction of a steel pipeline at a cost of $200 million. The pumping and other operating costs are expected to accrue to $6 million/year, increasing by 1% per year. Alternatively, a gravity flow canal can be constructed at a cost of $325 million. The O&M costs for the canal are expected to be $1million at EOY2, increasing by $250,000/year. Which conduit should be built at an interest rate of 6% if:
a. The projects are expected to last for 25 years?
b. The projects are expected to last forever?

Answer rating: 100% (QA)

Sure lets calculate the present worth of each project for both scenarios a The projects are expected ... View the full answer