After investigating the technology, you have recommended that your company invest in piezoelectric generators that cost $80 000.00 each. The generator converts ambient vibrations into usable power. When attached to heavy machinery, any slight rumble causes a flap in the generator to flutter which in turn creates a current that gets fed back into the power grid of your production line. Each generator has been shown to result in net energy savings of $600.00 per month for the next 20 years.

Question

(a) Draw a cash-flow diagram which depicts the situation
(b) Assume an annual interest rate of 5.0 percent and determine the equivalent annual savings as a result of installing one generator.
(c) How many generators would need to be purchased to meet a company goal to reduce electrical costs by $20 000.00 per year?

Answer 1