What is the present worth of this project

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Reference no: EM131355799

A regional municipaliy is studying a water supply plan for its tri-city and surrounding area to the end of year 2055. To satisfy the water demand, one suggestion is to construct a pipeline from a major lake some distance away. Construction would start in 2015 and take five years at a cost of $20 million per year. The cost of maintenance and repairs starts after completion of construction and for the first year is $2 million, increasing by 1% per year thereafter. At an interest rate of 6%, what is the present worth of this project?

Assume that all cash flows take place at year-end. Consider the present to be the end of 2010/beginning of 2011. Assume that there is no salvage value at the end of year 2055.

Reference no: EM131355799

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