5 10 A 50 meter tunnel must be constructed as part of a new aqueduct system for a city Two alternatives are being considered One

Question

5 10 A 50 meter tunnel must be constructed as part of a new aqueduct system for a city Two alternatives are being considered One is to build a full capacity tunnel now for 500 000 The other alternative is to build a half capacity tunnel now for 300 000 and then to build a second parallel half capacity tunnel 20 years hence for 400 000 The cost of repair of the tunnel lining at the end of every 10 years is estimated to be 20 000 for the full capacity tunnel and 16 000 for each half capacity tunnel Determine whether the full capacity tunnel or the half capacity tunnel should be constructed now Solve the problem by B C ratio analysis using a 5 interest rate and a 50 year analysis period There will be no tunnel lining repair at the end of the 50 years

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