Question
Josh Rudin has been investigating the costs and benefits of rooftop solar. Currently, Josh pays 200 per month to his local electric utility company for
Josh Rudin has been investigating the costs and benefits of rooftop solar. Currently, Josh pays 200 per month to his local electric utility company for his households nonsolar electricity.
A rooftop solar installation would cost 28,000 in Year 0 and it would last for 10 years. At the end of Year 10 a tear-down fee of 1,000 would be required to have the solar panels removed, thus making way for whatever new technology is available at that time.
The federal governments Investment Tax Credit (ITC) would pay 35% of the Year-0 investment expense.
The appropriate monthly discount rate for all cash flows is 0.4% (this means a nonpercentage discount rate of 0.004).
Josh considers debt. He inquires about the terms of a loan. He is offered a 10-year solar mortgage that has monthly payments and an APR of 4.80% and he takes out the loan. Four years later, the solar-mortgage rate is 3.0%. Josh decides to refinance using a new 10-year mortgage. What will his new monthly payments be? By how much does the refi increase his wealth?
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