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2. A home buyer obtained a mortgage of $500,000 for an annual interest rate of 6% over 30 years. A designer suggested using a high-performance heat pump ($20,000) to replace the conventional HVAC systems ($7,000). This extra cost is taken from the extra loan (beyond the initial $500,000). What is the extra monthly payment if using the high-performance heat pump? If the annual electricity saving using the high-performance heat pump is 2000 kWh. Assume the electrical price is $0.08/kWh during Year-1 and it will increase 10% every year since Year- 2. What is the simple payback period? If considering the annual electricity rate increase, what will be the total energy savings during the 30-years in the present value if the inflation rate is 3% from Year-2? Assume both the high-performance and conventional systems have a lifetime of $30 years. Should the home buyer consider the suggestion and why?

2. A home buyer obtained a mortgage of $500,000 for an annual interest rate of 6% over 30 years. A designer suggested using a high-performance heat pump ($20,000) to replace the conventional HVAC systems ($7,000). This extra cost is taken from the extra loan (beyond the initial $500,000). What is the extra monthly payment if using the high-performance heat pump? If the annual electricity saving using the high-performance heat pump is 2000 kWh. Assume the electrical price is $0.08/kWh during Year-1 and it will increase 10% every year since Year- 2. What is the simple payback period? If considering the annual electricity rate increase, what will be the total energy savings during the 30-years in the present value if the inflation rate is 3% from Year-2? Assume both the high-performance and conventional systems have a lifetime of $30 years. Should the home buyer consider the suggestion and why?

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
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2. A home buyer obtained a mortgage of $500,000 for an annual interest rate of 6% over 30 years. A designer suggested using a high-performance heat pump ($20,000) to replace the conventional HVAC systems ($7,000). This extra cost is taken from the extra loan (beyond the initial $500,000). What is the extra monthly payment if using the high-performance heat pump? If the annual electricity saving using the high-performance heat pump is 2000 kWh. Assume the electrical price is $0.08/kWh during Year-1 and it will increase 10% every year since Year- 2. What is the simple payback period? If considering the annual electricity rate increase, what will be the total energy savings during the 30-years in the present value if the inflation rate is 3% from Year-2? Assume both the high-performance and conventional systems have a lifetime of $30 years. Should the home buyer consider the suggestion and why?
Transcribed Image Text:2. A home buyer obtained a mortgage of $500,000 for an annual interest rate of 6% over 30 years. A designer suggested using a high-performance heat pump ($20,000) to replace the conventional HVAC systems ($7,000). This extra cost is taken from the extra loan (beyond the initial $500,000). What is the extra monthly payment if using the high-performance heat pump? If the annual electricity saving using the high-performance heat pump is 2000 kWh. Assume the electrical price is $0.08/kWh during Year-1 and it will increase 10% every year since Year- 2. What is the simple payback period? If considering the annual electricity rate increase, what will be the total energy savings during the 30-years in the present value if the inflation rate is 3% from Year-2? Assume both the high-performance and conventional systems have a lifetime of $30 years. Should the home buyer consider the suggestion and why?
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