Question

The City of San Antonio is considering various options for providing water in its 50-year plan, including desalting. One brackish aquifer is expected to yield desalted water that will generate revenue of $4.1 million per year for the first 4 years, after which less production will decrease revenue by 10% per year each year. If the aquifer will be totally depleted in 22 years, what is the present worth of the desalting option revenue at an interest rate of 5% per year? The present worth of the desalting option revenue at an interest rate of 5% per year is determined to be $ 33.514

Answer 1

ANSWER:

Your answer is correct as the calculations were very long and included a lot of decimals and so i solved it in excel and the answer is $33.514 million dollars.

please check with your teacher as the answer is right.

year	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22
revenue		4.10	4.10	4.10	4.10	3.69	3.32	2.99	2.69	2.42	2.18	1.96	1.76	1.59	1.43	1.29	1.16	1.04	0.94	0.84	0.76	0.68	0.62
npv	33.51466

in excel we use the npv function

=npv(rate, cash flows from year 1 to year 22)