Problemyou have a pipeline with corrosion problems and can, Ask an Expert

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Problem:

You have a pipeline with corrosion problems, and can either...Pay for injection treatment at $600,000 in year one and escalating by 6% per year in years 2-6.

-or-

Repalce the 20,000 feet of piping (that was $32 per foot last year) with a stell piple at a cost of $80 per foot plus $750,000 of installation costs, all at time zero (now).
There is no resell value for the old piping, and the minimum Rate of Return is 12%.

Calculate the present worth cost of each option in time zero, and compute the incremental net present value (Inc. NPV). What is the best choice? Explain in detail and provide step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91145930

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