Question

Your friend tries to evaluate the idea of installing solar roof and asks for your advice. The initial costs including materials and installation are estimated to be $20,000. It will generate enough electricity for the entire household for the next 30 years. The monthly maintenance costs about $10 for the solar roof. Without the solar roof, your friend pays about $120 on electricity bill every month. Assume the annual cost of 4%. If your friend likes to have the lower monthly cost, would you suggest installing the solar roof? What is the monthly saving or additional cost if going with solar

Answer 1

Installation Charge = $20,000

Monthly Maintenance Charge after installing solar roof = $10

Time Period is 30 years

Annual Rate = 4%

So, the costs of the maintenance = Installation charge + Monthly maintenance * FVIFA (r%/12, 30*12)

FVIFA = (1+r) ^ n -1/ r

Or, FVIFA = (1+ 0.04/12) ^ 360 -1/ 0.04/12

Or, FVIFA = 2.313498/ 0.00333= 694.05

So, costs of the maintenance = $20,000 + $10*694.05 = $26940.50

Without installing the solar roof the total costs would have been:

$120 electricity bill * fvifa (r%/12, 30*12)

Or, costs of the maintenance = $120* 694.05 = $83286 (approx)

Yes the solar roof must be installed

Over the period of 30 years the total costs saved will be $83286- $26940.50= $56345.50

Now Monthly Savings would be = $56345.50/ (30*12) = $156.50