Question: Refer to Problem. If the government expects inflation to average 3% per year, what is the equivalent uniform annual savings in fuel (jet fuel savings will be $2.5 billion one year from now). MARR remains at 7% per year (im).
Problem: The Fischer-Tropsch (F-T) process was developed in Germany in 1923 to convert synthesis gas (i.e., a mixture of hydrogen and carbon monoxide) into liquid with some gaseous hydrocarbons. Interestingly, the F-T process was used in World War II to make gasoline and other fuels.
a. If the U.S. military can save one billion gallons per year of foreign oil by blending its jet fuel with F-T products, how much can the government afford to invest (through tax breaks and subsidies) in the F-T industry in the United States? The government's MARR is 7% per year, the study period is 40 years, and one gallon of jet fuel costs $2.50.
b. If Congress appropriates $25 billion to support the F-T process industry, what is the simple payback period?