Sales of bottled water in the United States totaled 16.3 gallons per person in 2

Question

Sales of bottled water in the United States totaled 16.3 gallons per person in 2004. Evian Natural Spring Water costs 40 cents per bottle. A municipal water utility provides tap water for $2.10 per 1000 gallons. If the average person drinks 2 bottles of water per day or uses 5 gallons per day in getting that amount of water from the tap, what are the present worth values of drinking bottled water or tap water per person for 1 year? Use an interest rate of 6% per year, compounded monthly, and 30 days per month.

Explanation / Answer

Bottled water: Cost/mo = –(2)(0.40)(30) = $24.00

PW = –24.00(P/A,0.5%,12)

= –24.00(11.6189)

= $–278.85

Municipal water: Cost/mo = –5(30)(2.10)/1000 = $0.315

PW = –0.315(P/A,0.5%,12)

= –0.315(11.6189)

= $–3.66

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