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Problem 2: You are hired as a consultant for an oil company that is planning to redo an existing pipeline. The company would like you to compare 2 alternatives. The first is to renovate the existing line and the second is to put in a new line. An interest rate of 8% compounded quarterly is assumed and the annual maintenance and pumping costs are considered to be paid at the end of the period in which their cost occurred. a) Compare the alternatives using net present worth analysis NPW. b) Which alternative would you recommend to the oil company and why? Renovate New Pipeline Initial cost $6M $15M Service Life 25 yrs 50 yrs SV $0 $500,000 Quarterly $15,000 $8,000 Maintenance Pump $2.50 $0.75 cost/hour Pump Operation 1752 hrs/qrt