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Consider a heat pump purchase with the following details: * Initial cost: 15,000 USD * Annual...

Consider a heat pump purchase with the following details:


* Initial cost: 15,000 USD


* Annual savings: 2,500 USD for 25 years


* Annual maintenance costs: 150 USD for 25 years


* Estimated salvage value: 300 USD at the end of 25 years


(a) If the interest rate is 12%, what is the net present worth of this heat pump?


(b) Calculate the simple payback period of the heat pump.

(c) Calculate the Benefit/Cost ratio of the heat pump purchase.

(d) Does the heat pump purchase make sense financially? Why?

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