A large water utility is planning to upgrade its SCADA system for controlling well pumps, booster pumps, and disinfection equipment so that everything can be centrally controlled. Phase I will reduce labor and travel costs by $28,000 per year. Phase II will reduce costs by an additional $20,000 per year, that is, $48,000. Phase I savings should occur in years 0, 1, 2, and 3 and phase II savings should occur in years 4 through 10. Let i = 8% per year. (a) Determine the present worth of the upgraded system for years 1 to 10. (b) The utility General Manager had hoped for a present worth of at least $400,000. Determine the interest rate at which this would be correct.
A large water utility is planning to upgrade its
SCADA system for controlling well pumps,
booster pumps, and disinfection equipment so
that everything can be centrally controlled. Phase
I will reduce labor and travel costs by $28,000
per year. Phase II will reduce costs by an additional
$20,000 per year, that is, $48,000. Phase I
savings should occur in years 0, 1, 2, and 3 and
phase II savings should occur in years 4 through
10. Let i = 8% per year.
(a) Determine the present worth of the upgraded
system for years 1 to 10.
(b) The utility General Manager had hoped for a
present worth of at least $400,000. Determine
the interest rate at which this would be
correct.
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