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An internet site* claims that: A National Association of Home Builder survey found that if a home shows reduced energy costs of $1,000 annually, the
An internet site* claims that: "A National Association of Home Builder survey found that if a home shows reduced energy costs of $1,000 annually, the average home buyer will be willing to pay an additional $8,728." However, any increase in the cost of the home also increases the annual expenses paid for the mortgage (= loan), real estate taxes, and insurance. Assume that the energy savings is due to reduced electricity consumption and that: Mortgage rate i = 0.045/year, loan period 1 = 15 yeurs Insurance rate u = 0.003/year Tax rate x = 0.025/year Cost of electricity c = $0.12/kWh a. What is the capital recovery factor during the period when the loan is being repaid? b. Given the capital recovery factor, insurance and tax rates, what is the additional annual cost associated with the additional $8728 in home cost? C. How many kWh must be saved to generate $1000 in annual energy savings
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