Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 13

The subsidized cost of producing water at the E1 Paso Water Utilities (EPWU) Kay Bailey Hutchison (KBH) desalting plant is $1.56 per 1000 gallons. Under a contract that EPWU has with Fort Bliss, the utility sells water to the Army post at a discounted price of $1.28 per 1000 gallons. (The KBH plant was built on Army property.) If Fort Bliss used 2 billion gallons of water each year, what is the present worth of the discount for a 20-year period at an interest rate of 6% per year