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In this problem, we consider replacing an existing electrical water heater with an array of solar panels. The net installed investment cost of the
In this problem, we consider replacing an existing electrical water heater with an array of solar panels. The net installed investment cost of the panels is $1,600 ($2,000 less a 20% tax credit from the government). Based on an energy audit, the existing water heater uses 190 kilowatt hours (kWh) of electricity per month, so at $0.11 per kWh, the cost of operating the water heater is $20.9 per month. Assuming the solar panels can save the entire cost of heating water with electricity, answer the following questions. a. What is the simple payback period for the solar panels? b. What is the IRR of this investment if the solar panels have a life of 10 years? a. The simple payback period is 77 months. (Round to the nearest whole number.) b. The IRR of the investment is % per month. (Round to two decimal places.)
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