Problem
A 50-meter tunnel must be constructed for a new city aqueduct. One alternative is to build a fullcapacity tunnel now for $500,000. The other alternative is to build a half-capacity tunnel now for $300,000 and then to build a second parallel halfcapacity tunnel 20 years hence for $400,000. The cost to repair the tunnel lining every 10 years is $20,000 for the full-capacity tunnel and $16,000 for each half-capacity tunnel. Determine whether the full-capacity tunnel or the half-capacity tunnel should be constructed now. Solve the problem by the conventional benefit-cost ratio analysis, using a 5% interest rate and a 50-year analysis period. There will be no tunnel lining repair at the end of the 50 years.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.