A build-to-operate (BTO) company signed a contract to operate Alamosa County industrial wastewater treatment plants for the next 20 years. The contract will pay the company $2.5 million now and amounts increasing by $200,000 each year through year 20. At an interest rate of 10% per year, what is the present worth now? Solve using (a) tabulated factors, and (b) a spreadsheet.
What will be an ideal response?
(a) Factors: Find P in year –1 using gradient factor and then move forward 1 year
P -1 = 2,500,000(P/A,10%,21) + 200,000(P/G,10%,21)
= 2,500,000(8.6487) + 200,000(58.1095)
= $33,243,650
F = P 0 = 33,243,650(F/P,10%,1)
= 33,243,650 (1.1000)
= $36,568,015
(b) Spreadsheet: If entries are in cells B2 through B22, the function
= NPV(10%,B3:B22)+B2 displays $36,568,004, which is the
present worth in year 0.
You might also like to view...
Air at 0ºC and 80% humidity is heated to 25ºC. If no water is added to the air, the humidity after the air is heated, using the psychrometric chart, will be nearest:
A) 25% B) 20% C) 15% D) 10%
A(n) ____________________ is a living organism that transmits or carries a disease organism
Fill in the blank(s) with the appropriate word(s).
When evaluating muscling, a judge should first observe which of the following?
a. width over the rack c. width between the rear feet b. center of the leg d. no answers
The rubber used in most brake system components will swell if exposed to ________
A) Engine oil or ATF B) Water C) Moisture in the air D) DOT 5 brake fluid