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An environmental consultant is considering the installation of a water storage tank for a client. The tank is estimated to have an initial cost of $417,000, and annual maintenance costs are estimated to be $7,300 per year. As an alternative, a holding pond can be provided a short distance away at an initial cost of $280,000 for the pond plus $90,000 for pumps and piping. Annual operating and maintenance costs for the pumps and holding pond are estimated to be $14,000. The planning horizon is 20 years, and at that time, neither alternative has any salvage value. MARR is 17 %/year.
What is the present worth of each alternative?
Storage tank: $
Holding pond: $
Which is the preferred alternative?
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