Your energy bill is expected to be $250 next month (month 1) and is expected to grow at 0.64% per month for the foreseeable future (aka forever), after your utility provider ran into financial trouble. You read recently that installing solar panels on your roof will reduce your energy bill by 20% (so month 1 would be $200) and decrease the growth of the bill to 0.23% per month for the foreseeable future. Assuming this is true, that you plan to stay in the house for the foreseeable future, and that the applicable discount rate is 11% per year, from a pure financial perspective what is the most you’d be willing to pay today to have solar panels installed immediately? Assume the panels could be installed quickly and the cost savings would start in month 1.
Your energy bill is expected to be $250 next month (month 1) and is expected to grow at 0.64% per month for the foreseeable future (aka forever), after your utility provider ran into financial trouble. You read recently that installing solar panels on your roof will reduce your energy bill by 20% (so month 1 would be $200) and decrease the growth of the bill to 0.23% per month for the foreseeable future. Assuming this is true, that you plan to stay in the house for the foreseeable future, and that the applicable discount rate is 11% per year, from a pure financial perspective what is the most you’d be willing to pay today to have solar panels installed immediately? Assume the panels could be installed quickly and the cost savings would start in month 1.
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