(30%) It was estimated that the 750,000 metric tonnes firewood currently burnt in BC can be

replaced by 600,000 metric tonnes wood pellets (since pellet stove is more efficient than

firewood stove and pellet contains less moisture than firewood). For each household with a

wood furnace for home heating, a new wood pellet stove will cost about $2500 and onaverage

burns 3 metric tonnes of pellets each year. Assuming the lifetime of the stove is 15

years, the annual interest rate is 6% compounded semi-annually, the price for one metric

tonne wood pellets is $120, and one metric tonne firewood costs $150.

(a). (5%) Select a functional unit for the comparison of the two bioenergy heating systems;

(b). (20%) Calculate the present value of purchasing a wood pellet stove to replace an

existing conventional wood stove/furnace;

(c). (5%) If an incentive equal to 50% of capital cost is provided by the BC government to

the pellet stove users, as practiced in the state of Washington, would you consider switching

to a pellet stove based on the present value?