Nippon Steel's expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $45,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 11% per year? The equivalent annual worth is determined to be $
Nippon Steel's expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $45,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 11% per year? The equivalent annual worth is determined to be $
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
Related questions
Question
Transcribed Image Text:Nippon Steel's expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic
gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated
to increase by $45,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an
interest rate of 11% per year?
The equivalent annual worth is determined to be $
Expert Solution
Step 1
| Computation of Present Worth | |||
| Year | Cash Flow ($) | PV Factor @11% | Discounted Cash Flows ($) |
| (A) | (B) | (A) x (B) | |
| 0 | 550,000 | 1.0000 | 550,000 |
| 1 | 550,000 | 0.9009 | 495,495 |
| 2 | 595,000 | 0.8116 | 482,902 |
| 3 | 640,000 | 0.7312 | 467,968 |
| 4 | 685,000 | 0.6587 | 451,210 |
| 5 | 730,000 | 0.5935 | 433,255 |
| 6 | 775,000 | 0.5346 | 414,315 |
| 7 | 820,000 | 0.4817 | 394,994 |
| 8 | 865,000 | 0.4339 | 375,324 |
| 9 | 910,000 | 0.3909 | 355,719 |
| 10 | 955,000 | 0.3522 | 336,351 |
| 11 | 1,000,000 | 0.3173 | 317,300 |
| 12 | 1,045,000 | 0.2858 | 298,661 |
| PW ($) = | 5,373,494 | ||
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Recommended textbooks for you
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.