Determine the amount of the uniform annual fee

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Reference no: EM132171196

Question - The City of Columbia is trying to attract a new manufacturing business. It has offered to install and operate a water pumping plant to provide service to the proposed plant site. This would cost $50,000 now, plus $5000 per year in operating costs for the next 10 years, all measured in Year-0 dollars. To reimburse the city, the new business must pay a fixed uniform annual fee, A, at the end of each year for 10 years. In addition, it is to pay the city $50,000 at the end of 10 years. It has been agreed that the city should receive a 3% rate of return, after taking an inflation rate, f, of 7% into account. Determine the amount of the uniform annual fee.

Reference no: EM132171196

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