Question
A city is offering to install and operate a water pumping station to provide service to a proposed new production facility. The station will cost
A city is offering to install and operate a water pumping station to provide service to a proposed new production facility. The station will cost $30,000 now plus it will incur $5,000 per year in operating costs for the next 3 years, all measured in real dollars. To reimburse the city, the new business must pay a fixed uniform annual fee, A, at the end of each year for 3 years to cover the construction and operating costs of the station. It is agreed that the city should receive a 6% real rate of return after taking an inflation rate of 4% into account. Determine the equivalent uniform annual cost in actual dollars to the new business.
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