The city of Waterbourne has made it a strategic goal to enhancelivability in the city. The city has decided to undertake a projectthat will occur in two phases. During the first phase, the citywill connect several of the parks with walking paths. During thesecond phase, the city will add water features or splash fountainsto several of the parks.
The initial cost of the project will be $409250. Annualutilities for maintaining the walking paths and keeping them litduring the early evening are estimated to be $13520, with costsincreasing by $157 each subsequent year. The paths will requirerepaving in year 9 at a cost of $49867 and again in year 19 at acost of $65295.
The water features and splash fountains will be added to theparks at the end of year 11 at a cost of $222659. The waterutilities are estimated to be $16643 per year, increasing by 12%each subsequent year. (The first payment for the water utilitieswill occur at the end of year 11.)
The city has secured a sponsorship from a local business to helppay for part of the project. The city will receive a grant from thebusiness of $112755 per year, increasing by 7% each subsequentyear. The city will receive the grant for 8 years. (The city willreceive the first grant payment at the end of year 1.)
Using a nominal annual interest rate of 7% compounded annuallyand a lifespan of 28 years, what is the present worth of the entireproject?
