Question

In: Economics

Pollution control equipment for a pulverized coal cyclone furnace is estimated to cost $270,000, 2 years...

Pollution control equipment for a pulverized coal cyclone furnace is estimated to cost $270,000, 2 years from now, an additional $120,000, 4 years from now and, an additional $100,000 5years from now At i=8 % per year,what is the equivalent annual worth of the cash flow series?

Solutions

Expert Solution

The present worth = 270,000(P/F, 8%, 2) + 120,000(P/F, 8%, 4) + 100,000(P/F, 8%, 5)

                              = 270,000(0.8573) + 120,000(0.7350) + 100,000(0.6806)

                              = 231,471 + 88,200 + 68,060

                              = 387,731

Equivalent annual worth = 387,731(A/P, 8%, 5)

                                       = 387,731(0.2505)

                                       = $97,126.62

Thus, the equivalent annual worth of the cash flow series is $97,126.62


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