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...
A certain delivery service offers both express and standard delivery. Seventy-five percent of parcels are sent by standard delivery, and 25% are sent by express. Of those sent standard, 80% arrive the next day, and of those sent express, 95% arrive the next day. A record of a parcel delivery is chosen at random from the company’s files.
a. What is the probability that the parcel was shipped express and arrived the next day? b. What is the probability that it arrived the next day? c. Given that the package arrived the next day, what is the probability that it was sent express?
CAD stands for Continuous Approved Design
Indicate whether the statement is true or false.
The length and diameter of a cylinder are usually placed in the view that shows the cylinder as a(n) ____.
A. cylinder B. rectangle C. slice D. circle
The combined desk telephone and the Hoover Model 150 upright vacuum cleaner were both designed by ____.
A. Henry Dreyfuss B. Raymond Loewy C. William Morris D. Walter Gropius