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An entrepreneurial electrical engineer approached a large water utility with a proposal that promises to reduce the utility's power bill by at least 15% through installation of patented surge protectors. The proposal states that the engineer will not be paid for the first year, but beginning in year 2, she will receive three equal, annual payments that are equivalent to 60% of the power savings achieved in year 1 due to the protectors. Assuming that the utility's power bill of $1 million per year is reduced by 15% after installation of the surge protectors, what will be the future worth in year 4 of the uniform payments to the engineer? Use an interest rate of 10% per year.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91720038

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