Two possible routes for a power line are under study. In both cases, the power l

Question

Two possible routes for a power line are under study. In both cases, the power line will last 15 years, have no salvage value, have annual property taxes of 2% of first cost, and have a yearly power loss of $500/km.

If 9% interest is used, FIND

1. EUAC (Under) (round to nearest $100)  

2.  EUAC (Around)  (round to nearest $100)  

3. Which alternative do you recommend? (Under/Around)

PLEASE USE EXCEL TO SOLVE AND PLS SHOW EXCEL FORMULAS

Around the lake Under the lake Length 16 km 6 km First cost $8800/km $24,000 /km Maintenance $175/km/yr $325 /km/yr

Explanation / Answer

Workings

Answer to Question 1

Answer to Question 2

Answer to Question 3

Power line under the lake is recommended because of lower EUAC. The EUAC for power line construction under the lake is 25700 and the EUAC for power line construction around the lake is 31100 and hence power line under the lake will have a saving of $5400 per annum.

Formula Description Around the lake Under the lake A Length (in Km) 16 6 B First cost ($ per Km) 8800 24000 C = A*B Total First cost (in $) 140800 144000 D Maintenance cost each year /Km 175 325 E = A*D Total Maintenance cost each year 2800 1950 F = C*2% Annual property Taxes 2816 2880 G = A*500 Annual Power Loss 8000 3000 H = E+F+G Total Cost per annum 13616 7830 I Life in years 15 15 J Salvage Value in $ 0 0 K Interest Rate 9% 9%

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