Allen Bradley claims that its XM1Z1A and XM442 electronic overspeed detection re

Question

Allen Bradley claims that its XM1Z1A and XM442 electronic overspeed detection relay modules pro- vide customers a cost-effective monitoring and control system for turbo machinery. If the equip- ment provides more efficient turbine performance to the extent of $20,000 in year 1, $22,000 in year 2, and amounts increasing by $2000 per year, how much could Mountain Power and Light afford to spend now at 10% per year interest if it wanted to recover its investment in 5 years? Allen Bradley claims that its XM1Z1A and XM442 electronic overspeed detection relay modules pro- vide customers a cost-effective monitoring and control system for turbo machinery. If the equip- ment provides more efficient turbine performance to the extent of $20,000 in year 1, $22,000 in year 2, and amounts increasing by $2000 per year, how much could Mountain Power and Light afford to spend now at 10% per year interest if it wanted to recover its investment in 5 years? Allen Bradley claims that its XM1Z1A and XM442 electronic overspeed detection relay modules pro- vide customers a cost-effective monitoring and control system for turbo machinery. If the equip- ment provides more efficient turbine performance to the extent of $20,000 in year 1, $22,000 in year 2, and amounts increasing by $2000 per year, how much could Mountain Power and Light afford to spend now at 10% per year interest if it wanted to recover its investment in 5 years?

Explanation / Answer

Amount = $20,000 + $22,000 + $24,000 + $26,000 + $28,000 = $120,000

                                

Amount = Principal (1 + interest rate)^years

$120,000 = Principal (1 + 0.10)^5

Principal = $120,000 / 1.61051

               = $74,510.56

Answer: The investment would be $74,510.56.

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