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1. A new engineer is evaluating whether to use a higher-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $25,000, $20,000, and $13,000. The interest rate is 6%, and the transmission line should have a life of 30 years. a. What is the present worth for each estimated value? b. Use the range of estimates to compute the mean annual savings, and then determine the present worth.

1. A new engineer is evaluating whether to use a higher-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $25,000, $20,000, and $13,000. The interest rate is 6%, and the transmission line should have a life of 30 years. a. What is the present worth for each estimated value? b. Use the range of estimates to compute the mean annual savings, and then determine the present worth.

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
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Engineering Econ HW8 Q1

1. A new engineer is evaluating whether to use a higher-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $25,000, $20,000, and $13,000. The interest rate is 6%, and the transmission line should have a life of 30 years. a. What is the present worth for each estimated value? b. Use the range of estimates to compute the mean annual savings, and then determine the present worth.
Transcribed Image Text:1. A new engineer is evaluating whether to use a higher-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $25,000, $20,000, and $13,000. The interest rate is 6%, and the transmission line should have a life of 30 years. a. What is the present worth for each estimated value? b. Use the range of estimates to compute the mean annual savings, and then determine the present worth.
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