You have to advise the mayor how best to proceed with the construction of a 200,000 km^3 water

| December 2, 2017

You have to advise the mayor how best to proceed with the construction of a 200,000 km^3 water supply reservoir. Since only 120,000 km^3 of storage is required for the first 20 years, an alternative to building the full capacity now is to build the reservoir in 2 stages. The first stage would have a capacity of 120,000 km^3. Stage 2 would add an additional capacity of 80,000 km3 20 years from now by increasing the height of the reservoir. Estimated costs are:.cloudfront.net/media%2F3ca%2F3cab1de7-7955-418d-98f6-96d2c9b69b61%2FphpBNhM1M.png”>The reservoir lasts forever. The annual effective MARR is 7%. Explain how to choose between the 2 alternatives. Please include cash flow diagram as well and a clear explanation.

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