A.5. A homeowner asks your help in calculating costs versus savings for home insulation. The following amounts of energy are consumed annually: cooling: 60 x 10 Btu/yr from electricity at $12.00/10 Btu heating: 25 x 10 Btu/yr from oil at $8.00/10 Btu Additional insulation, weather stripping, and storm windows will cost $2,000 and have a life of 20 years, and are estimated to save 20 percent of the BTUs now consumed. Energy costs are expected to rise at 12 percent per year compounded. The homeowner borrows and invests at i = 15 percent annual rate. (a) What is the amount of anticipated saving for the first year only? (Assume the savings accrue during the year and are credited at the end of each year). (Ans. $184/yr) (b) Find the present worth, P, of the savings in energy costs over the full 20-year period. (Ans. $2,518) (e) What is the present worth, P, of the cost of additional insulation? (Ans. $2,000) (d) Compare the present worths of the insulation cost versus energy savings and tell whether the fuel savings justify the cost of insulation. (Ans. $518)