Missing information :
interest rate = 14%
Answer:
annual savings rate per operating hour $0.94
Explanation:
initial investment $100,000
total operating hours = 3,000 x 5 = 15,000 hours
savings first year $35,000
then decrease by 3% per year
annual savings:
year 1 $35,000
year 2 $33,950
year 3 $32,931.50
year 4 $31,943.56
year 5 $30,985.25
we need to determine the PV of the savings per year:
PV = $35,000/1.14 + $33,950/1.14² + $32,931.50/1.14³ + $31,943.56/1.14⁴ + $30,985.25/1.14⁵ = $30,701.75 + $26,123.42 + $22,227.82 + $18,913.15 + $16,092.77 = $114,058.91
NPV of investment = $114,058.91 - $100,000 = $14,058.91
annual savings per operating hour = $14,058.91 / 15,000 = $0.94
