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Quiz3-Fall2007

# Quiz3-Fall2007 - Name Date CEE 3000 CIVIL ENGINEERING...

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Name: ___________________________ Date: ________________________ CEE 3000: CIVIL ENGINEERING SYSTEMS QUIZ 3 Fall 2007 Closed Books/Notes (Use the back of sheets if necessary) 1. A public utility is planning a new water supply for a development and you have been asked to compare the cost of constructing a completely new water supply system to the cost of buying water from a nearby utility already in operation. In either case, the system will last for 25 years and the interest rate is 7%. Determine the better alternative. (10 points) Alternative A: Construct new system: First cost = \$2.5 million O&M = \$200,000 for the first three years and increasing by 5% per year every year thereafter (that is, the first actual increase occurs at EOY 4). Salvage value at EOY 25 = \$0 Alternative B: Purchase water from existing nearby utility: Cost = \$325,000 per year. All necessary construction costs have been paid for by the nearby utility.

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