Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 29

In an effort to reduce childhood obesity by reducing the consumption of sugared beverages, some states have imposed taxes on soda and other soft drinks. A survey by Roland Sturm of 7300 fifth-graders revealed that if taxes averaged 4 cents on each dollar's worth of soda, no real difference in overall consumption was noticed. However, if taxes were increased to 18 cents on the dollar, Sturm calculated they would make a significant difference. For a student who consumes 100 sodas per year, what is the future worth of the extra cost from 4 cents to 18 cents per soda Assume the student consumes sodas from grade 5 through graduation in grade 12. Use an interest rate of 6% per year.