You found a report stating that the equivalent annual worth of chemical costs associated with a water treatment process were $125,000 per year for a 5-year period. The report stated that the cost in year 1 was $190,000 and the cost decreased by a uniform amount each year over that 5-year period. However, it did not say how much the decrease was each year. If the interest rate was 20% per year, the amount of the annual decrease, G, is closest to:

Question

a) $27,358
(b) $31,136
(c) $33,093
(d) $39,622

Answer 1

125,000 = 190,000 – G(A/G,20%,5)
125,000 = 190,000 – G(1.6405)
G = $39,622
(d) $39,622