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Description of Equivalent Annual Worth

A rural utility company provides standby power to pumping stations using diesel-powered generators. An alternative has arisen whereby the utility could use a combination of wind and solar power to run its generators, but it will be a few years before the alternative energy systems are available. The utility estimates that the new systems will result in savings of $15,000 per year for 3 years, starting 2 years from now, and $25,000 per years for 4 more years after that. At an interest rate of 8% per year, what is the equivalent annual worth (years 1-8) of the projected savings?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M927790

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