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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