The first cost of a solar heating system to be installed in an existing country home is $8,000 (including installation and tax credits). The system will provide an estimated 64% of the annual heating load which is 124 GJ/yr. The current fuel is liquid propane with a cost of $20/GJ, inflating at 3% per year. The costs are mortgaged with a down payment of $2,000. The balance is financed over 5 years with a mortgage rate of 4%. The market discount rate is 10%. The owners effective tax bracket is 42%. (Neglect insurance, maintenance, and property taxes.)

Use that problem as a starting point to determine the uncertainty in Life Cycle Savings (LCS) assuming that the uncertainty in both the inflation and discount rate is 25%, the uncertainty in solar fraction is 10%, and the uncertainty in heating load is 10%.

Note: Before tax analysis 0.641 Year 5 2000 Given Savings: N(mortgagc): Down payment: Investment: Mortgage rate: Market discount rate: Fuel cost: Fuel inflation: Annual Consumption: 8000 0.04 0.1 Annual fuel savings 0 1587.2 1 1634.816 2 1683.86048 3 1734.376294 4 1786.407583 5 1839.999811 6 1895.199805 7 1952.055799 & 2010.617473 9 20/0.935997 20 0.03 124) Part a) 10 yeart econmic analysis period, no resale Part b)without mortgage Solar project payments Net cashflow Solar project payments Net cashflow ($3,347.76) ($1,760.56) -8000 -6412.8 ($1,347.76) $287.05 0 1634.816 ($1,347.76) $336.10 0 1683.8G048 ($1,347./6) $386.61 U 1/34.3/629 ($1,347.76) $438.64 0 1786.40758 0 $1,840.00 0 1839.99981 0 $1,895.20 U 1895.19981 0 $1,952.06 0 1952.0558 0 $2,010.62 0 2010 61747 0 $2,070.94 0 2070.936 Rate of return; 38% 24% Present worth: $3,998.62 $3,653.15 Part c)resale value 1/3 of orginal cost after 10 years Solar project payments Net cashllow ($3,347.76) ($1,760.56) $1,347.76) $287.05 ($1,317.76) $336.10 ($1,347.76) $386.61 ($1,347.76) $438.64 $0.00 $1,810.00 $0.00 $1,895.20 $0.00 $1,952.06 $0.00 $2,010.62 $2,666.67 $4,737.60 10% $5,026.73 Note: Before tax analysis 0.641 Year 5 2000 Given Savings: N(mortgagc): Down payment: Investment: Mortgage rate: Market discount rate: Fuel cost: Fuel inflation: Annual Consumption: 8000 0.04 0.1 Annual fuel savings 0 1587.2 1 1634.816 2 1683.86048 3 1734.376294 4 1786.407583 5 1839.999811 6 1895.199805 7 1952.055799 & 2010.617473 9 20/0.935997 20 0.03 124) Part a) 10 yeart econmic analysis period, no resale Part b)without mortgage Solar project payments Net cashflow Solar project payments Net cashflow ($3,347.76) ($1,760.56) -8000 -6412.8 ($1,347.76) $287.05 0 1634.816 ($1,347.76) $336.10 0 1683.8G048 ($1,347./6) $386.61 U 1/34.3/629 ($1,347.76) $438.64 0 1786.40758 0 $1,840.00 0 1839.99981 0 $1,895.20 U 1895.19981 0 $1,952.06 0 1952.0558 0 $2,010.62 0 2010 61747 0 $2,070.94 0 2070.936 Rate of return; 38% 24% Present worth: $3,998.62 $3,653.15 Part c)resale value 1/3 of orginal cost after 10 years Solar project payments Net cashllow ($3,347.76) ($1,760.56) $1,347.76) $287.05 ($1,317.76) $336.10 ($1,347.76) $386.61 ($1,347.76) $438.64 $0.00 $1,810.00 $0.00 $1,895.20 $0.00 $1,952.06 $0.00 $2,010.62 $2,666.67 $4,737.60 10% $5,026.73