Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 21

Johnson Controls spent more than $2.5 million retrofitting a government complex and installing a computerized energy-management system for the State of Massachusetts. As a result, the state's energy bill dropped from an average of $6 million a year to $3.5 million. Moreover, both parties will benefit from the 10-year life of the contract. Johnson recovers half the money it saved in reduced utility costs (about $1.2 million a year over 10 years); Massachusetts has more money to spend on other things. What is the rate of return realized by Johnson Controls in this energy-control system