Operating and maintenance costs of new plant

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Reference no: EM131972490

The City of Lake Woebegone consumes approximately 10,000,000 gallons of treated water per year. The city is going to replace the old water treatment facility with a new water treatment plant. The initial construction cost of the new plant (including land acquisition) is $2,500,000. The anticipated operating and maintenance costs are S250,000 per year. With proper maintenance the facility should last for 20 years. What is the minimum user fee that should be charged, expressed as [S/gallon], in order to cover the construction, operating, and maintenance costs of the new plant. Use an effective annual interest rate of 10%. Ignore any influence of taxes and inflation.

Reference no: EM131972490

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