A.3. A sanitary sewer can be constructed using either a deep cut or a lift station, with the follow- ing costs estimated. Using incremental rate of return analysis techniques, determine which alternative should be selected for an MARR of 7 percent. Deep-cut alternative Lift-station alternative 235,000 15,000 1,800 40 275,000 Installation cost of pipe ($) Installation cost of lift station ($) Annual maintenance costs ($) - 400 Expected life (yr) 40 (Ans. IROR = 4.73% < 7%; select lift station) %3D

A.3. A sanitary sewer can be constructed using either a deep cut or a lift station, with the follow- ing costs estimated. Using incremental rate of return analysis techniques, determine which alternative should be selected for an MARR of 7 percent. Deep-cut alternative Lift-station alternative 235,000 15,000 1,800 40 275,000 Installation cost of pipe ($) Installation cost of lift station ($) Annual maintenance costs ($) - 400 Expected life (yr) 40 (Ans. IROR = 4.73% < 7%; select lift station) %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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SOLVE IT USING A. Rate of Return on Additional Investment MethodB. Annual Cost Method
A trust fund is to be established for providing the costs associated with a small engineering laboratory for the Engineering College. The following costs are required for the engineering laboratory: (1) The construction cost is$1,500,000and the initial equipment cost is$900,000; (2) The annual laboratory operating cost is$250,000for the first 3 years and$200,000thereafter; (3) The cost of equipment replacement is$350,000every 6 years, beginning 6 years from now. How much money is required in the trust fund now to build the engineering laboratory and maintain its perpetual operation and equipment replacement? The interest rate is 8%per year.
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