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Problem 9 (10 pts 10 pts x 1 problem) The city of Long Beach needs...

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Accounting

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Problem 9 (10 pts 10 pts x 1 problem) The city of Long Beach needs an additional supply of water from Duck Creek. The city engineer has selected two plans for comparison. The gravity plan would divert water at a point 10 miles up Duck Creek and carry it through a pipeline by gravity to the city. A system using a pumping station would divert water at a point closer to city and pump it into the city. The pumping plant would be built in two stages, with 75% of its capacity installed initially and the remaining 25% installed 10 years later. The engineer has assumed that each plan will last 30 years and be worthless at the end of its life. Using the following data and an interest rate of 8%, find the maximum (X) that should be paid for the gravity plan. You are required to use EUAC for both gravity and pumping to obtain X. Answer: Gravity Pumping X (?) 1,800,000 S 350,000 Initial investment Completion cost in 10th year Annual operating and maintenance costs Annual power costs S25,000 $50,000 Average costs the next 20 years0 $100,000 $ 10,000 Average costs the first 10 years

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