Your city is planning a stormwater drainage improvement project to mitigate flooding in residential and commercial areas, which has a construction cost due at the end of the first year of $8 million, second year of $5 million, and third year of $3 million. It is completed at the end of the third year and thereafter incurs an annual operating cost of $451000 per year (due at the end of each year). Benefits from the project, such as traffic delay reduction and safety improvements, also begin during the fourth year and are valued at $2.3 million available at the end of that year, growing at a 2% compound rate of increase out to the service life (analysis period) of 27 years. The compounded annually interest rate is 5%. Compute the following: present worth cost, present worth benefit, and present worth net benefit of the project.
Question 1
Calculate the present worth of the cost (in million $)
(Round your answer to six decimal places.)