Calculate the present worth for each estimated value – Operation Management
A new engineer is evaluating whether to use a high-voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are 25,000, 20,000, and 13,000. The interest rate is 6%, and the transmission line should have a life of 30 years.
(a) Calculate the present worth for each estimated value
(b) Use the range of estimates to compute the mean annual savings
(c) Determine the present worth of the mean annua saving in part (b).
