1.
Expenses associated with heating and cooling for a planned R&D pilot
project follow an arithmetic gradient. The project will last for a total of
15 years. The cost was $550,000 for the year before last year (i.e., year
-2). Since then, the cost has increased by $40,000 each year and will
continue this trend ($40,000 increase each year) to the completion of this
project in year 12. What is the equivalent present worth if all the energy
costs can be paid at year 0 at an interest rate of 10% per year?