Math Problem Statement
A small company heats its building using a gas furnace. It expects to spend
$8 comma 8008,800
on natural gas this first year. The cost of the natural gas is expected to increase by
1010%
per year every subsequent year. There is also the maintenance cost on the gas furnace which is expected to be
$874.00874.00
in the first year and to increase by
1515%
per year every subsequent year. The planning horizon is
1515
years and the company uses an annual interest rate of
1818%
for economic analysis of its investments.
(a) The projected annual cost of natural gas in year
15 need calculations only
Solution
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Math Problem Analysis
Mathematical Concepts
Compound Interest
Exponential Growth
Economic Analysis
Formulas
Future Value (FV) formula for compound interest: FV = P * (1 + r)^t
Exponential Growth formula for maintenance cost: FV = P * (1 + r)^t
Theorems
Compound Interest Theorem
Exponential Growth Theorem
Suitable Grade Level
Grades 10-12
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