Question

West Lafayette is spending $28 million on upgrades to the existing wastewater treatment plant with the addition of tertiary UV treatment. The expected life of this new treatment phase is expected to last 60 years, and it will have a market value of $5 million at the end of its useful lifetime. Operating and maintenance expenses for the tertiary treatment system are projected to be $2.2 million per year. If the city’s MARR is 6% per year, what is the annual worth of the system? Express your answer in terms of dollars with negative values indicating costs, rounded to the nearest dollar (e.g., 1234 if you believe the answer to be $1,234.12).

Answer 1

- x fc year - A B F G year cash flows present value present value of factor @ 6% cash flows 1.00000 16.16143 0.03031 initial cost $28,000,000 annual operating and maintenance expenses 1--60 $2,200,000 residual value 60 $5,000,000 net present value of the system present value annuity factor (6%, 60 years) annual worth of the system -$28,000,000 $35,555,141 $151,572 -$63,403,569 16.16143 -3923142

For formulas and calculations, refer to the image below -

D2 x ✓ fix year AB year cash flows present value factor present value of @ 6% cash flows initial cost 0 -28000000 1 annual operating and maintenance expenses 1--60-2200000 1=PV(6%,60,-1,0,0) residual value 60 5000000 =PV(6%,60,0,-1,0) net present value of the system present value annuity factor (6%, 60 years) annual worth of the system =E3*F3 =E4*F4 =E5*F5 =SUM(G3:65) =F4 =G6/G7

In case you have any query, kindly ask in comments.