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The annual fuel savings for a factory is 1000 gallons of fuel. Fuel costs are expect...

The annual fuel savings for a factory is 1000 gallons of fuel. Fuel costs are expect to rise 2.5% a year, the current cost of a gallon of fuel is $100. The best estimate of the annual inflation-free interest rate (i’) is 6%. If the factory’s remaining useful life is 15 years, calculate the present worth of the total fuel savings using actual dollar analysis?

Solutions

Expert Solution

The fuel savings are as below

Year Savings
1 102500
2 105062.5
3 107689.1
4 110381.3
5 113140.8
6 115969.3
7 118868.6
8 121840.3
9 124886.3
10 128008.5
11 131208.7
12 134488.9
13 137851.1
14 141297.4
15 144829.8
Presentworth $1,158,764.78

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jeff jeffy answered 1 year ago
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