Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 26

Austin Utilities is planning to install solar panels to provide some of the electricity for its groundwater desalting plant. The project would be done in two phases. The first phase will cost $4 million in year 1 and $5 million in year 2. This investment will result in energy savings (phase 2) of $540,000 in year 3, $546,000 in year 4, and amounts increasing by $6000 each year through year 10. Let i = 10% per year.
a) What is the future worth of the savings
b) Is the cost of the solar project justified by the savings (Hint: Calculate the difference between savings and cost).