The town of Dry Gulch needs an additional supply of water from Pine Creek. The town engineer
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 (divert water at a point 10 miles up Pine Creek and carry it through a pipeline by gravity to the town) and a pumping plan (divert water at a point closer to the town and pump 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.
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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