Austin Utilities is planning to install solar panels to provide some of the electricity for its groundwater desalting plant. The project would be done in two phases. The first phase will cost $4 million in year 1 and $5million in year 2. This investment will result in energy savings (phase2) of $540,000 in year 3, $546,000 in year 4, amounts increasing by $6,000 each year through 10. Let I=10% per year.
a)What is the future worth of the savings?
b) Is the cost of the solar project justified by the savings? (Hint: Calculate the difference b/t future values of savings and cost.)