Respuesta :
The present equivalent of energy savings is $88,000 and since the amount is less than the cost of insulation, the cost of insulation is not justified.
What are equivalent energy savings?
- Energy Efficiency on a par Measure refers to decreases in the use of fossil fuels other than natural gas or the use of other energy sources not derived from fossil fuels that are equivalent to decreases in the consumption of natural gas or electricity.
- Energy conservation measures include turning off the lights when leaving a room, unplugging appliances when not in use, and choosing to walk rather than drive.
- Gaining more control over their energy bill and lowering the demand for the planet's natural resources are the two main motivations for energy conservation.
According to our question -
the cost of installation is $90,000. the life of insulation is 7 years.
the interest rate, r is 0.18.
the cash flow series of energy savings is a geometric cash flow series. where the first cash flow , A is $16,000 and the geometric gradient is 0.15
The present equivalent of energy savings is given by:
P = A[(1+(1+g)^n(1+i)^-n)/(i-g)]
= (16000)[(1+(1+0.15)^7(1+0.18)^-7)/(0.18-0.15)]
= $88,000
Hence, The present equivalent of energy savings is $88,000 and since the amount is less than the cost of insulation, the cost of insulation is not justified.
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