53:171 Water Resources Engineering
Problem #9
Economic Analysis of Alternatives

In the class example, we compared two alternatives for an aqueduct section with a design life of 100 years.  Plan A: A tunnel with a capital cost of $450,000, an O&M cost of $4000, and no salvage value.  Plan B: A canal with a steel flume, with capital costs of $120,000 for the canal (which lasts 100 years), $50,000 for the canal lining (which is replaced at the same cost every 20 years), and $90,000 for the flume section (which is replaced after 50 years at the same cost), an O&M cost of $10,500, and no salvage value.

Redo the evaluation of the equivalent annual cost assuming an annual interest rate i of 3%. Determine:

1. The equivalent annual cost of Plan A
2. The equivalent annual cost of Plan B
3. Which alternative is best (based on economic costs alone).

Note:  For items (a) and (b), sketch the cash flow diagram for the plan.