Question: A new engineer is evaluating whether to use a higher voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses.

A new engineer is evaluating whether to use a higher voltage transmission line. It will cost $250,000 more initially, but it will reduce transmission losses. The optimistic, most likely, and pessimistic projections for annual savings are $20,000, $15,000, and $8,000. Interest rate is 6% and the transmission line has a life of 30 years.
(a) What is the present worth (of cost and benefits) for each estimated value?
(b) Use the range of estimates to compute the mean annual savings, and then determine the present worth.
(c) Would you recommend the higher voltage line? Give both economic and noneconomic reasons.

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