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agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by several studies that relied on the hedonic pricing ai jadi en approach. How much confidence should the homeowner have in these estimated 01 values? c. From the values on the EPA website and the size of her family, the homeowner estimates that the new electric appliance will provide her and her family with annual benefits of $250 while they live in the house for the next four years. Assuming she considers this amount valid, should she purchase the stove? gmi tulog mot d. Why might we expect the social benefits of this purchase to exceed the private benefits? pass adW e. The EPA wants to motivate the adoption of electric cooking appliances and is offering a 20% rebate on the total purchase and installation price ($900) of electric stoves. Is this rebate sufficient to make the homeowner purchase the stove? level-yuzubni sru annil owt gaizhiqmoo yuanbni yaitult ogemsb Jeni amor bos 3) - AS = DAM yd novig TRAS tsargsm S Myd novig a nois

agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by several studies that relied on the hedonic pricing ai jadi en approach. How much confidence should the homeowner have in these estimated 01 values? c. From the values on the EPA website and the size of her family, the homeowner estimates that the new electric appliance will provide her and her family with annual benefits of $250 while they live in the house for the next four years. Assuming she considers this amount valid, should she purchase the stove? gmi tulog mot d. Why might we expect the social benefits of this purchase to exceed the private benefits? pass adW e. The EPA wants to motivate the adoption of electric cooking appliances and is offering a 20% rebate on the total purchase and installation price ($900) of electric stoves. Is this rebate sufficient to make the homeowner purchase the stove? level-yuzubni sru annil owt gaizhiqmoo yuanbni yaitult ogemsb Jeni amor bos 3) - AS = DAM yd novig TRAS tsargsm S Myd novig a nois

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 2E
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agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by several studies that relied on the hedonic pricing ai jadi en approach. How much confidence should the homeowner have in these estimated 01 values? c. From the values on the EPA website and the size of her family, the homeowner estimates that the new electric appliance will provide her and her family with annual benefits of $250 while they live in the house for the next four years. Assuming she considers this amount valid, should she purchase the stove? gmi tulog mot d. Why might we expect the social benefits of this purchase to exceed the private benefits? pass adW e. The EPA wants to motivate the adoption of electric cooking appliances and is offering a 20% rebate on the total purchase and installation price ($900) of electric stoves. Is this rebate sufficient to make the homeowner purchase the stove? level-yuzubni sru annil owt gaizhiqmoo yuanbni yaitult ogemsb Jeni amor bos 3) - AS = DAM yd novig TRAS tsargsm S Myd novig a nois
Transcribed Image Text:agrody calming Inted 001 and me 2. A homeowner is concerned about the various air pollutants (e.g., benzene and methane) released in her house when she cooks with natural gas. She is considering replacing her gas oven and stove with an electric stove comprising an induction cooktop and convection oven. The new appliance costs $900 to purchase and install. Capping the old gas line costs an additional $150 (a one-time fee). The old line must be inspected for leaks each year after capping, at a cost of $35 for each inspection. a. If the homeowner plans to remain in the house for four more years and the discount rate is 4%, what is the minimum present value of the benefits that the homeowner would need to experience for this purchase to be justified based on its private net sub present value? b. While trying to understand how she might express the value of reduced exposure to indoor air pollutants in dollar terms, the homeowner consulted the EPA website and found estimates provided by several studies that relied on the hedonic pricing ai jadi en approach. How much confidence should the homeowner have in these estimated 01 values? c. From the values on the EPA website and the size of her family, the homeowner estimates that the new electric appliance will provide her and her family with annual benefits of $250 while they live in the house for the next four years. Assuming she considers this amount valid, should she purchase the stove? gmi tulog mot d. Why might we expect the social benefits of this purchase to exceed the private benefits? pass adW e. The EPA wants to motivate the adoption of electric cooking appliances and is offering a 20% rebate on the total purchase and installation price ($900) of electric stoves. Is this rebate sufficient to make the homeowner purchase the stove? level-yuzubni sru annil owt gaizhiqmoo yuanbni yaitult ogemsb Jeni amor bos 3) - AS = DAM yd novig TRAS tsargsm S Myd novig a nois
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