A facilities engineer is considering a $50,000 investment in an

A facilities engineer is considering a $50,000 investment in an energy management system (EMS). The system is expected to save $10,000 annually in utility bills for N years. After N years, the EMS will have a zero salvage value. In an after‐tax analysis, how many years would N need to be in order for the engineer’s company to earn a 10% return on the investment? Assume MACRS depreciation with a three‐year class life and a 35% tax rate.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...

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