Question

An environmentally friendly green home (99% air tight) costs about 8% more to construct than a conventional home. Most green homes can save 15% per year on energy expenses to heat and cool the dwelling. For a $250,000 conventional home, how much would have to be saved in energy expenses per year when the life of the home is 30 years and the interest rate is 10% per year

Answer 1

$2,122

Explanation:

The incremental investment = Rate of interest × Conventional home amount

= 0.08 × $250,000

= $20,000

The equivalent annual savings = incremental investment(A/P, Interest rate, Number of years)

= $20,000(A/P, 10%, 30)

= $2,122

Therefore for computing the saved in energy expenses per year we simply applied the above formula.