Basics of Engineering Economy 1st Edition by Leland Blank,Anthony Tarquin

Exercise 9

Burling Water Cooperative currently contracts the removal of small amounts of hydrogen sulfide from its well water using manganese dioxide filtration prior to the addition of chlorine and fluoride.Contract renewal for 5 years will cost $5,000 annually for the next 3 years and $00,000 in years 4 and 5.Assume payment is made at the end of each contract year.Burling Coop can install the filtration equipment for $50,000 and perform the process for $0,000 per year.At a discount rate of 6% per year, does the contract service still save money?