Engineering Economy – Problem 2.36

ByAnthony

El Paso Water Utilities (EPWU) purchases surface water for treatment and distribution to EPWU customers from El Paso County Water Improvement District during the irrigation season. A new contract between the two entities resulted in a reduction in future price increases in the cost of water from 8% per year to 4% per year for the next 20 years. If the cost of water next year (which is year 1 of the new contract) will be $260 per acre-foot, what is the present worth of the savings (in $/acre-ft) to the utility between the old and new contracts? Let the interest rate equal 6% per year.

Sample problems and notes are based on the following textbook: Engineering Economy 7th Edition

ISBN-13: 978-0073376301

ISBN-10: 0073376302

Edition: 7

Author: Leland Blank, Anthony Tarquin 

Published Date: 2011

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