Discuss the below:
Q: Fred is evaluating whether a more efficient motor with a life of 5 years should be installed on an assembly line. Energy savings are estimated at $400 for the first year, then increasing by 6% annually. If the interest rate is 10%,
a) What is the present value of the energy savings?
b) If the energy savings are increasing by 10% annually, what is the present value of the energy savings?