It is anticipated that the needs for UPW (ultrapure water) at the new Angular Enterprises site will continue for a long time, as long as 50 years. This is the rationale for using capitalized cost as a basis for the economic decision between desalinated seawater (S) and purified groundwater (G). These costs were determined (Example 5.7) to be CCS = $–53.58 million and CCG = $–48.91 million. Groundwater is the clear economic choice.

Yesterday, the general manager had lunch with the president of Brissa Water, who offered to supply the needed UPW at a cost of $5 million per year for the indefinite future. It would mean a dependence upon a contractor to supply the water, but the equipment, treatment, and other costly activities to obtain UPW on-site would be eliminated. The manager asks you to make a recommendation about this seemingly attractive alternative under the following conditions at the same MARR of 12% per year as used for the other analyses:

(a) The annual cost of $5 million remains constant throughout the time it is needed.

(b) The annual cost starts at $5 million for the first year only, and then it increases 2% per year. (This increase is above the cost of providing UPW by either of the other two methods.)