The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert sy

Question

The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. Interestingly, the F-T process was used in World War II to make gasoline and other fuels. If the U.S. military' can save two billion gallons per year of foreign oil by blending its jet fuel with F-T products, how much can the government afford to invest (through tax breaks and subsidies) in the F-T industry in the United States? The government's MARR is 7% per year, the study period is 50 years, and one gallon of jet fuel costs $2.25. If Congress appropriates $27 billion to support the F-T process industry, what is the simple payback period? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 7% per year. billion can the government afford to invest in the F-T industry in the United States. (Round to two decimal places.)

Explanation / Answer

The government would be willing to spend a maximum value equal to the total present value of amount saved on fuel:

Present value = 2billion x 2.25 x (1-1.07-50)/0.07

Present value = $62.1033 billion

The government woudl be willing to psend a maximum of $62.1033 billion.

(b) Each year the governmnet would spend 2.25x2 = 4.5 billion

SImple pay back period = 27/4.5 = 6 years

This means the net revenue (amount saved-initial cost) would become postive after 6 years. Till 6 years the cost would be greater than revenu or amount saved each year.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.