Question

2.18 China spends an estimated $100,000 per year on cloud seeding efforts which include using anti- aircraft guns and rocket launchers to fill the sky with silver iodide. In the United States, utilities that run hydroelectric dams are among the most active cloud seeders because they believe it is a cost-effective way to increase limited water sup- plies by 10% or more. If the yields of cash crops will increase by 4% per year for the next 3 years because of extra irrigation water captured behind dams during cloud seeding, what is the future worth (in year 3) of the extra value of the cash crops? Assume the interest rate is 10% per year and the value of the cash crops without the extra irrigation water would be $600,000 per year.

Answer 1

value of cash crops without the extra irrigation water=$600000

cash crops will increase by 4% =24000

total 624000

after three years it will be=624000*3=1872000

Theb interest rate of three years will be 1872000*10%=187200

The extra value of cash crops will be=(24000*3)+(187200*3)

=72000+561600

=633600

The extra value of cash crops will be=633600