A solar heating system costs $6500 initially and qualifies for a federal tax credit (40% of cost, not to exceed $4000). The cost of money is 10%, and inflation is expected to be 7% during the life of the system. The expected life of the system is 15 years with zero salvage value. The homeowner is in the 40% income tax bracket. The initial (first-year) fuel saving, estimated at $500, is expected to increase in response to inflation. The annual maintenance cost of the system is established at 5% of the annualized cost of the system. What is the time required for the payback condition to be reached for this investment?
A solar heating system costs $6500 initially and qualifies for a federal tax credit (40% of cost, not to exceed $4000). The cost of money is 10%, and inflation is expected to be 7% during the life of the system. The expected life of the system is 15 years with zero salvage value. The homeowner is in the 40% income tax bracket. The initial (first-year) fuel saving, estimated at $500, is expected to increase in response to inflation. The annual maintenance cost of the system is established at 5% of the annualized cost of the system. What is the time required for the payback condition to be reached for this investment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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A solar heating system costs $6500 initially and qualifies for a federal tax credit (40% of cost, not to exceed $4000). The cost of money is 10%, and inflation is expected to be 7% during the life of the system. The expected life of the system is 15 years with zero salvage value. The homeowner is in the 40% income tax bracket. The initial (first-year) fuel saving, estimated at $500, is expected to increase in response to inflation. The annual maintenance cost of the system is established at 5% of the annualized cost of the system. What is the time required for the payback condition to be reached for this investment?
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