22 Allamuchy Township needs more water from Ahote Creek The

2.2 Allamuchy Township needs more water from Ahote Creek. The town engineer has selected two plans for comparison: a gravity plan (divert water at a point 10 miles up Ahote Creek and pipe it by gravity to the town) and a pumping plan (divert water at a point closer to town). The pumping plant would be built in two stages, with half-capacity installed initially and the other half installed 10 years later. The analysis will assume a 40-year life, 10% interest, and no salvage value. Use an annual cash flow analysis to find which plan is more economical. Pumping Gravity $5,400,000.00 $2,500,000.00 Initial investment Additional investment 10th year Annual 0&M; Power Cost per year Average first 10 years Average next 40 years $400,000.00 $23,000.00 $48,000.00 $90,000.00 $280,000.00 a) Calculate the EUAC of the gravity plan. [2 points] b) Calculate the EUAC of the pumping plan. [2 points] c) Which plan should be adopted and why? [1point+1 points]

Solution

(a)

EUAC, Gravity ($) = 5,400,000 x A/P(10%, 40) + 23,000 = 5,400,000 x 0.1023** + 23,000 = 552,420 + 23,000

= 575,420

(b)

EUAC, Pumping ($) = 2,500,000 x A/P(10%, 40) + 400,000 x P/F(10%, 10) x A/P(10%, 40) + 48,000 + 90,000 x P/A(10%, 10) x P/F(10%, 10) x A/P(10%, 40) + 280,000 x P/A(10%, 30)^# x P/F(10%, 20) x A/P(10%, 40)

= 2,500,000 x 0.1023** + 400,000 x 0.3855** x 0.1023** + 48,000 + 90,000 x 6.1446** x 0.3855** x 0.1023** + 280,000 x 9.4269** x 0.1486** x 0.1023**

= 255,750 + 15,775 + 48,000 + 21,809 + 40,126

= 381,460

(c)

Since Pumping has a lower EUAC, this should be adopted.

**From A/P, P/F and P/A Factor tables

#Since analysis period is 40 years, we need to consider power cost at $280,000 per year for 30 years only.