ABSTRACT
This chapter deals with the problem of dollars which are paid or earned in different years.
The problem arises because the value of money changes over time. More specifically, a dollar to be paid in twenty years is not the same
as a dollar which must be paid today, or next year, or in any other year. We can illustrate this point with a brief example. Let us say your water system needs to finance a project and receives
two offers: Offer A requires the system to pay $190.000 for ten years. Offer B requires the system to pay $100.000 for twenty years. Which is less expensive for your system? (There are important considerations as to whether you should make
your decision on an annual or total cost basis. These matters will be discussed in Chapters 6 and 7, below. For now, however, we will consider only the total cost basis.)
The natural approach to the problem would seem to add up the total payments and see which is cheaper.
