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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?

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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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