American Electric Power agreed to spend $4.6 billion to clean up 46 coal-fired power plants that are believed to be contributing to acid rain. The plan is to reduce nitrogen oxide emissions by 69% by 2016 and sulfur dioxide emissions by 79% by 2018. Assume Plan A is to spend $0.575 billion per year in years 1 through 4 and an additional $0.575 billion per year in years 7 through 10. Plan B is to spend $0.46 billion in each of years 1 through 10. At an interest rate of 8% per year, which plan is more economical to the company based on a present worth analysis?
American Electric Power agreed to spend $4.6 billion to clean up 46 coal-fired power plants that are believed to be contributing to acid rain. The plan is to reduce nitrogen oxide emissions by 69% by 2016 and sulfur dioxide emissions by 79% by 2018. Assume Plan A is to spend $0.575 billion per year in years 1 through 4 and an additional $0.575 billion per year in years 7 through 10. Plan B is to spend $0.46 billion in each of years 1 through 10. At an interest rate of 8% per year, which plan is more economical to the company based on a present worth analysis?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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American Electric Power agreed to spend $4.6 billion to clean up 46 coal-fired power plants that are believed to be contributing to acid rain. The plan is to reduce nitrogen oxide emissions by 69% by 2016 and sulfur dioxide emissions by 79% by 2018. Assume Plan A is to spend $0.575 billion per year in years 1 through 4 and an additional $0.575 billion per year in years 7 through 10. Plan B is to spend $0.46 billion in each of years 1 through 10. At an interest rate of 8% per year, which plan is more economical to the company based on a present worth analysis?
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