In: Accounting
A dam is to be constructed to provide a storage reservoir for a flood control project. The table below has descriptions of costs and benefits for five reservoir capacity options:
Reservoir capacity (acre-feet) |
Initial construction costs ($ million) |
Average annual O&M cost ($ million) |
Average annual benefits ($ million) |
50,000 |
4.5 |
0.032 |
0.317 |
100,000 |
5.0 |
0.079 |
0.761 |
150,000 |
8.0 |
0.127 |
1.078 |
200,000 |
14.0 |
0.143 |
1.269 |
250,000 |
22.0 |
0.190 |
1.332 |
Assume the project life = 50 years and i = 6%. Determine the reservoir capacity which: