Question
In an environmental project, a ground source heat pump system will be installed, which will result in an annual fuel savings of $2000/year. The initial
In an environmental project, a ground source heat pump system will be installed, which will result in an annual fuel savings of $2000/year. The initial investment of the heat pump system is $14 000. The life-time of the heat pump system is 20 years. The annual maintenance cost is $300/year. At the end of the 20 years' life time, the salvage value is $1500. The interest rate is 10%.
Please investigate and comment that how the "annual fuel saving" and its variation will affect the results of
(1) The net present value (NPV) of this investment
(2) The benefit-cost ratio (BCR) of this investment
(3) Internal rate of return (IRR) of this investment
(4) Based on the above NPV, BCR and IRR values, please determine whether this investment is attractive or not?
For example, the "annual fuel saving" varies +/- $0~300 based on the original $2000 /year.
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