A utility company provides stand by power using diesel poweredgenerators. An alt

Question

A utility company provides stand by power using diesel poweredgenerators. An alternative has been developed using natural gas butthe gas will not be available for 3 years. By switching to gas theywill save 13,000 per year for 10 years starting three years fromtoday . At an interest rate of 6% what is the annual worth of thesavings over the next 12 years

10,157

12,789

14,879

22,656

A utility company provides stand by power using diesel poweredgenerators. An alternative has been developed using natural gas butthe gas will not be available for 3 years. By switching to gas theywill save 13,000 per year for 10 years starting three years fromtoday . At an interest rate of 6% what is the annual worth of thesavings over the next 12 years

10,157

12,789

14,879

22,656

Explanation / Answer

$13,000 per year

10 years

Savings Amount (PMT)

$13,000 per year

Number of Years

10 years

Intrest rate 6% FVoAF(6%,10) 13.181 Future Value of the Savings Amount (FV) $171,353 ($13,000 * 13.181) Annual Worth = FW (A/F i, n) Annual Worth = $171,353 (A/F, 6%,12)                       = $171,353 (0.0592768) $10,157.25 Annual Worth $10,157.25

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