Question

The SWE authorized construction projects totaling $1.08 million to improve desalination plant efficiency and salinity-reduction technology for reject chemicals. Three bids from potential vendors were received in the amounts of $1.05 M, $1.063 M and $1.075 M. Assume the savings will be realized immediately for each bid, were it accepted. Use an expected life of 10 years and the interest rate is 6% per year to do the following for the savings anticipated from the bids:

(a) Determine the equivalent future worth of the savings.

(b) Determine the equivalent annual worth of the savings.

(c) Prepare a chart to visualize parts (a) and (b).

Note: Savings = $1.08 million - Bid Amount

Answer 1

a)Equivalent present worth of the investment funds on each offer would be $0.01 million, $0.017 million and $0.025 million individually.

b)Equivalent yearly worth of the investment funds on each offer would be $1.359,$2,310 and $3,398 individually.

c)columnar diagram given underneath:

Authorized	$1.08 million
Bid	1	2	3
Bid Value	$1,050,000	$1,063,000	$1,075,000
Savings	$10,000	$17,000	$25,000
Equivalent present worth of savings	$10,000	$17,000	$25,000
Annuity factor for 10 years@6%	0.1359	0.1359	0.1359

(A/P,6%,10)
Equivalent annual worth of savings	$1,359	$2,310	$3,398