Jordan is considering building a nuclear power plant, which will be ready for production in 2030. The country's governing body is also considering a decommissioning liability law for the operator to put aside $1 million every month towards decommissioning cost. If the production life of the plant is 60 years and the operator puts the money at the end of the month in a savings account, earning 7.25% compounded monthly, what will be the value of the decommissioning fund after 60 years of production?
A) $12.49 billion
B) $10.87 billion
C) $720 million
D) $11.88 billion
E) $917.65 million

Question

Quizplus · Accepted Answer

The value of the decommissioning fund can be calculated using the future value of an annuity formula: FV = P * [((1 + r)^n - 1) / r], where P is the monthly payment ($1 million), r is the monthly interest rate (7.25% annual rate, so 7.25%/12 months = 0.60417% per month or 0.0060417 as a decimal), and n is the total number of payments (60 years * 12 months/year = 720 payments). Plugging in the values: FV = $1,000,000 * [((1 + 0.0060417)^720 - 1) / 0.0060417] = $12.49 billion.

Jordan Is Considering Building a Nuclear Power Plant, Which Will