Coal-fired power plants emit CO2 which is one of the gases that is of concern wi

Question

Coal-fired power plants emit CO2 which is one of the gases that is of concern with regard to global warming. A technique that power plants could adopt to keep most of the CO2 from entering the air is called CO2 capture and storage (CCS). If the incremental cost of the sequestration process is $0.019 per kilowatthour, what is the present worth of the extra cost over a 3-year period to a manufacturing plant that uses 100,000 kWh of power per month, if the interest rate is 12% per year compounded
quarterly?

Explanation / Answer

quarterly interest = 12/4 = 35 = 0.03 no. of quarters in 3 years = 3*4 = 12 per quarter cost = 100000*0.019*3 = 5700 ($) Present cost = 5700(1.03^12-1)/(0.03*1.03^12) = 56737.82 ($) (ANSWER)

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