(a) A tankless water heater costs $700 and has a projected life of 25 years. The cost of replacement will increase at an annual effective rate of 4% due to inflation. Determine the capitalised cost of buying a tankless water heater if interest rates are j₂ = 6% p.a.

Disregard inflation in the prices of energy and conventional water heaters in (b), (c) and (d) below

(b) A conventional water heater has an estimated cost of $200 with a life of 15 years. Calculate the capitalised cost of owning a conventional water heater at j₂ = 6% p.a.

(c) The tankless heater should save $8 per month in energy costs when compared to a conventional one. Is it cost-effective to buy a tankless heater? Use j₂ = 6% p.a.

(d) For a conventional heater, what is the most that should be spent on additional tank insulation if this insulation will save $4 per month in energy costs? Again use j₂ = 6% p.a.