Basics of Engineering Economy 2nd Edition by Anthony Tarquin,Leland Blank

Exercise 9

American Electric Power agreed to spend $4.6 billion to clean up 46 coal-fired power plants that are believed to be contributing to acid rain. The plan is to reduce nitrogen oxide emissions by 69% by 2016 and sulfur dioxide emissions by 79% by 2018. Assume Plan A is to spend $0.575 billion per year in years 1 through 4 and an additional $0.575 billion per year in years 7 through 10. Plan B is to spend $0.46 billion in each of years 1 through 10. At an interest rate of 8% per year, which plan is more economical to the company based on a present worth analysis