Determine the equivalent uniform annual cost

Reference no: EM13237849

Jenny is an engineer for a municipal power plant. The plant uses natural gas, which is currently provided from an existing pipeline at an annual cost of $10000 per year. Jenny is considering a project to construct a new pipeline. The initial cost of the new pipeline would be $35000, but it would reduce the annual cost to $5000 per year. Assume an analysis period of 20 years and no salvage value for either the new or existing pipeline. The interest rate is 6%.

a) Determine the equivalent uniform annual cost (EUAC) for the new pipeline.
b) Should the new pipeline be built?

Reference no: EM13237849

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