Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 52

A chemical engineer is considering two sizes of pipes, small (S) and large (L), for moving distillate from a refinery to the tank farm. A small pipeline will cost less to purchase (including valves and other appurtenances) but will have a high head loss and, therefore, a higher pumping cost. In writing the report, the engineer compared the alternatives based on future worth values, but the company president wants the costs expressed as present dollars. Determine present worth values if future worth values are FW S = $2.3 million and FW L = $2.5 million. The company uses a real interest rate of 1% per month and an inflation rate of 0.4% per month. Assume the future worth values were for a 10 year project period.