A homeowner in Queensland has the opportunity to install a solar water heater in her home for a cost of $3 000. After installation, the solar water heater will produce a small amount of hot water every day, forever, and will require no maintenance. How much must the homeowner save on water heating costs every year if this is to be a sound investment? (The interest rate is 8.5% per year.)
A)$255
B)$225
C)$267
D)$287

Question

Quizplus · Accepted Answer

To determine the annual savings required for the investment to be sound, we use the formula for the annual payment of a perpetuity: Annual Savings = Investment Cost * Interest Rate. Thus, $3,000 * 8.5% = $255.

A Homeowner in Queensland Has the Opportunity to Install a Solar