Question

The pumping cost for delivering water from the Ohio River to Wheeling Steel for cooling hot rolled steel was $1.8 million for the first 4 years. An effective energy conservation program resulted in a reduced cost of $1.77 million in year 5, and $1.74 million in year 6, and amounts decreasing by $30,000 each year through year 10. What is the present worth of the pumping costs in year 0 at an interest rate of 12% per year?

Answer 1

$9,923,100

Step-by-step explanation:

The computation of the present worth is as follows:

Year Annual cost PV factor at 12% Present value

1 $1,800,000 0.893 $1.607,400

2 $1,800,000 0.797 $1,434,600

3 $1,800,000 0.712 $1,281,600

4 $1,800,000 0.636 $1,144,800

5 $1,770,000 0.567 $1,003,590

6 $1,740,000 0.507 $882,180

7 $1,710,000 0.452 $772,920

8 $1,680,000 0.404 $678,720

9 $1,650,000 0.361 $595,650

10 $1,620,000 0.322 $521,640

Present worth $9,923,100