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A public agency plans to install an energy-saving device for a new building at $600,000. This device is expected to save $90,000 per year in base-year dollars for the next 25 years with no salvage value. The average annual general inflation rate is expected to be 3% in the next 25 years. The energy price is expected to have a differential inflation rate of 2% above the general inflation rate during the next 10 years and 4% above the general inflation rate for the following 15 years. The agency uses a MARR of 10% excluding inflation. Find the net present value of this investment to determine whether it is worthwhile.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92881332

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