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A single undergroung transmission circuit




A single undergroung transmission circuit is needed immidiately, and load studies indicated the need for a second circuit in 6 years. If provision is made for a second conduit when the conduit for the first circuit is installed, there will be no future need for reopening, trenching, backfilling, and repaving. The cost of installing a single circuit with minimum preparations for the eventual second circuit is $850,000. The installation of the second circuit will be considered to cost $800,000 at the end of year 6 in order to be in operation by the begining of year 7. If the second circuit is installed immidiately, The total cost will be $1.4 million.;Constant annual operationg and maintenance costs of the circuits are 8 percent of the first cost. The average life of a circuit is 20 years. The required rate of return on such investments is 10 percent before taxes.;a) Compare the deferred investment with the immidiate investment, using a 20-year study period.;b) Compare the two circuit plans on an infinite study period. Then compare the soulion with that in part (a). Which more reasonable? Why?


Paper#21700 | Written in 18-Jul-2015

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