Final answer:
The question involves calculating the present discounted value of future cash flows for maintenance costs that increase annually. The present worth is found by summing the present values of individual cash flows from year three to year nine, each discounted at a 10% interest rate considering the annual increase of $200.
Step-by-step explanation:
The student's question is asking for the calculation of the present worth or present discounted value of a series of future cash flows from maintenance costs, given a specific interest rate. The concept is similar to evaluating the present value of a bond with known future payments at a given discount rate. The cash flows for the industrial complex maintenance are expected to increase by $200 each year. This scenario can be approached by calculating the present value for each individual future cash flow and summing them to find the total present worth.
To calculate the present value of each cash flow, we use the present value formula: PV = FV / (1 + i)^n, where PV is the present value, FV is the future value of the cash flow, i is the interest (or discount) rate, and n is the number of years until the cash flow occurs.
The present worth of the cash flow stream from the industrial complex maintenance at a 10% interest rate is calculated by summing the present values of individual cash flows from year three to year nine. The calculation takes into account the increment of $200 in the cash flow each year from year four through year nine. Therefore, the present worth will be the sum of the present values of $1,000 in year three, $1,200 in year four, and so on, up to an incrementing cash flow in year nine.