An emission control system for a new car costs $800 and reduces NO_x emissions f

Question

An emission control system for a new car costs $800 and reduces NO_x emissions from 0.4 g/mile to 0.23 g/mile. Assume the car is driven 10000 miles per year, and the life of the emissions control system is 11 years with zero scrap value.

What is the annualized cost of this system in dollars per year if the discount rate (interest rate) is 5% per year? $ ______per year
What is the cost per 100 miles driven? $____
What is the cost per metric ton of NOx removed? $_____

I divided the $800 over the 11 year period, but could not get the correct answer.

Explanation / Answer

Using a financial calculator (BA II Plus n= 11 PV=-800, FV= 0, I/Y+5.0) PMT = 96.31. So cost per 100 miles driven is 96.31/10,000/100= 0.9631. (.4-.23)*10000=1,700 grams per year. Since 1 metric ton is 1,000,000 grams 1,000,000/1700= 588.23 Cost per metric ton is 588.23*96.31=$56,652.94

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