182k views
3 votes
A diesel-powered generator is going to be replaced with a natural gas-powered generator. It will save the utility cost at about $34,000 per year, starting 4 years from now. At an interest rate of 8% per year, determine the present worth in year 0 of the projected savings that will occur in years 4 through 10.

1 Answer

0 votes

Final answer:

The present worth of projected savings for replacing a diesel-powered generator with a natural gas-powered generator, from years 4 to 10 at an 8% interest rate, is calculated using a present worth analysis.

Step-by-step explanation:

The question inquires about the present worth of projected savings from switching to a natural gas-powered generator from a diesel-powered generator, with savings beginning in year 4 and continuing through year 10, at an 8% interest rate. This is a problem that involves understanding the time value of money, which falls under the subject of Engineering Economics. To calculate the present worth, one would perform a present worth analysis on each year's savings and then sum those values to get the total present worth of savings from year 4 to year 10.

To solve this, first, calculate the present value of each individual annual saving of $34,000 from year 4 to year 10 using the formula for present value PV = FV / (1 + i)n, where FV is the future value, i is the interest rate, and n is the number of years until the payment. Then, add these values to get the total present worth of savings.

User ImGroot
by
8.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.