Centrum Water & Gas provides standby power to pumping stations using diesel-powered generators. An alternative is the use of natural gas to power the generators, but it will be a few years before the gas is available at remote sites. Centrum estimates that by switching to gas, it will save $15,000 per year, starting 3 years from now through the end of year 20. At an interest rate of 8% per year, determine the present worth of the projected savings.
What will be an ideal response?
P = 15,000(P/A,8%,18)(P/F,8%,2)
= 15,000(9.3719)(0.8573)
= $120,518
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