A.5. A homeowner asks your help in calculating costs versus savings for home insulation. Thefollowing amounts of energy are consumed annually:cooling: 60 x 10° Btu/yr from electricity at $12.00/10° Btuheating: 25 x 10° Btu/yr from oil at $8.00/10° BtuAdditional insulation, weather stripping, and storm windows will cost $2,000 and have a lifeof 20 years, and are estimated to save 20 percent of the BTUS now consumed. Energy costsare expected to rise at 12 percent per year compounded. The homeowner borrows and investsat i = 15 percent annual rate.(a) What is the amount of anticipated saving for the first year only? (Assume the savingsaccrue during the year and are credited at the end of each year).%3D(Ans. $184/yr)(b) Find the present worth, P, of the savings in energy costs over the full 20-year period.(Ans. $2,518)(c) What is the present worth, P, of the cost of additional insulation?(Ans. $2,000)(d) Compare the present worths of the insulation cost versus energy savings and tell whetherthe fuel savings justify the cost of insulation.(Ans. $518)

Here, Consumption of Energy is as follows: Cooling : 60×106 Btu/yr at $12.00/106 Btu Heating: 25×106…

A.5. A homeowner asks your help in calculating costs versus savings for home insulation. The following amounts of energy are consumed annually: cooling: 60 x 10° Btu/yr from electricity at $12.00/10 Btu heating: 25 x 10° Btu/yr from oil at $8.00/10° Btu Additional insulation, weather stripping, and storm windows will cost $2,000 and have a life of 20 years, and are estimated to save 20 percent of the BTUS now consumed. Energy costs are expected to rise at 12 percent per year compounded. The homeowner borrows and invests 15 percent annual rate. (a) What is the amount of anticipated saving for the first year only? (Assume the savings accrue during the year and are credited at the end of each year). at i (Ans. $184/yr) (b) Find the present worth, P, of the savings in energy costs over the full 20-year period. (Ans. $2,518) (c) What is the present worth, P, of the cost of additional insulation? (Ans. $2,000) (d) Compare the present worths of the insulation cost versus energy savings and tell whether the fuel savings justify the cost of insulation. (Ans. $518)

A.5. A homeowner asks your help in calculating costs versus savings for home insulation. The following amounts of energy are consumed annually: cooling: 60 x 10° Btu/yr from electricity at $12.00/10 Btu heating: 25 x 10° Btu/yr from oil at $8.00/10° Btu Additional insulation, weather stripping, and storm windows will cost $2,000 and have a life of 20 years, and are estimated to save 20 percent of the BTUS now consumed. Energy costs are expected to rise at 12 percent per year compounded. The homeowner borrows and invests 15 percent annual rate. (a) What is the amount of anticipated saving for the first year only? (Assume the savings accrue during the year and are credited at the end of each year). at i (Ans. $184/yr) (b) Find the present worth, P, of the savings in energy costs over the full 20-year period. (Ans. $2,518) (c) What is the present worth, P, of the cost of additional insulation? (Ans. $2,000) (d) Compare the present worths of the insulation cost versus energy savings and tell whether the fuel savings justify the cost of insulation. (Ans. $518)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A.5. A homeowner asks your help in calculating costs versus savings for home insulation. The
following amounts of energy are consumed annually:
cooling: 60 x 10° Btu/yr from electricity at $12.00/10° Btu
heating: 25 x 10° Btu/yr from oil at $8.00/10° Btu
Additional insulation, weather stripping, and storm windows will cost $2,000 and have a life
of 20 years, and are estimated to save 20 percent of the BTUS now consumed. Energy costs
are expected to rise at 12 percent per year compounded. The homeowner borrows and invests
at i = 15 percent annual rate.
(a) What is the amount of anticipated saving for the first year only? (Assume the savings
accrue during the year and are credited at the end of each year).
%3D
(Ans. $184/yr)
(b) Find the present worth, P, of the savings in energy costs over the full 20-year period.
(Ans. $2,518)
(c) What is the present worth, P, of the cost of additional insulation?
(Ans. $2,000)
(d) Compare the present worths of the insulation cost versus energy savings and tell whether
the fuel savings justify the cost of insulation.
(Ans. $518)

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