An entrepreneurial electrical engineer has approached a large utility with a proposal that promises to reduce the utility’s power bill by at least 15% per year for the next 5 years through installation of patented surge protectors. The proposal states that the engineer will get $20,000 now and annual payments that are equivalent to 75% of the power savings achieved from the devices. Assuming the savings are the same every year at 15% and that the utility’s power bill is $1 million per year, what would be the equivalent uniform amount for years 1 to 5 of the payments to the engineer at an interest rate of 6% per year?
An entrepreneurial electrical engineer has approached a large utility with a proposal that promises to reduce the utility’s power bill by at least 15% per year for the next 5 years through installation of patented surge protectors. The proposal states that the engineer will get $20,000 now and annual payments that are equivalent to 75% of the power savings achieved from the devices. Assuming the savings are the same every year at 15% and that the utility’s power bill is $1 million per year, what would be the equivalent uniform amount for years 1 to 5 of the payments to the engineer at an interest rate of 6% per year?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
An entrepreneurial electrical engineer has approached
a large utility with a proposal that promises
to reduce the utility’s power bill by at least
15% per year for the next 5 years through installation
of patented surge protectors. The proposal
states that the engineer will get $20,000 now and
annual payments that are equivalent to 75% of the
power savings achieved from the devices. Assuming
the savings are the same every year at 15% and
that the utility’s power bill is $1 million per year,
what would be the equivalent uniform amount for
years 1 to 5 of the payments to the engineer at an
interest rate of 6% per year?
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