Austin needs to purchase a new heatingcooling system for

Assignment Help Finance Basics

Reference no: EM13380701

Austin needs to purchase a new heating/cooling system for his home. He is thinking about having a geothermal system installed, but he wants to know how long it will take to recoup the additional cost of the system. The geothermal system will cost $20,000. A conventional system will cost $7,000. Austin is eligible for a 30% tax credit to be applied immediately to the purchase.

He estimates that he will save $1,500 per year in utility bills with the geothermal system.These cash outflows can be assumed to occur at the end of the year. The cost of capital (or interest rate) for Austin is 7%.

How long will Austin have to use the system to justify the additional expense over the conventional model?

Discount future cash flows before calculating payback and round to a whole year.

Reference no: EM13380701

Questions Cloud

1 liquidity ratios edison stagg and thornton have the : 1. liquidity ratios. edison stagg and thornton have the following financial information at the close of business on

A perform a sensitivity analysis to see how npv is affected : a. perform a sensitivity analysis to see how npv is affected by changes in the number of procedures per day average

Ibm has generated annual dividend growth of 151 over the : ibm has generated annual dividend growth of 15.1 over the past 3 years. ibms most recent annual dividend is 2.90.

1 novelty gifts inc is experiencing some inventory control : 1. novelty gifts inc. is experiencing some inventory control problems. the managerwanda larue currently orders 5000

Austin needs to purchase a new heatingcooling system for : austin needs to purchase a new heatingcooling system for his home. he is thinking about having a geothermal system

If size of the market is approximately 100000 customers and : if size of the market is approximately 100000 customers and company expects to reach their normal market share

Assume the beta coefficient for a companys stock isszlig 02 : assume the beta coefficient for a companys stock isszlig 0.2 the risk-free rate of return rrf is 8 and the required

The managers of united medtronic are evaluating the : the managers of united medtronic are evaluating the following four projects for the coming budget period. the firms

Heywood diagnostic enterprises is evaluating a project with : heywood diagnostic enterprises is evaluating a project with the following net cash flows and probabilitiesyear----prob

User Account

All Pages