In: Accounting
Officials of Arley County, one of the fastest growing counties in the country, are looking for ways to expand their sewer system. They are considering two alternative sewer designs. Data for the two alternatives is given below. The interest rate is 6%. Which design should they select? Use the equivalent uniform annual worth method.
Design 1: Lift station, shallow installation
Installation Cost: $450,000
Operations and Maintenance: $15,000 per year for years 1-3,
increasing by $1,050/year every
year thereafter (i.e, $16,050 @ EOY4, $17,100 @ EOY5, etc.) Salvage Value: $75,000 @ EOY 20
Design 2: Gravity flow, deep installation
Installation Cost: $650,000
Operations and Maintenance: $2,000/year Salvage Value: $45,000 @
EOY 25