Question

A homeowner in a sunny climate has the opportunity to install a solar water heater in his home for a cost of $2,481. 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

Answer 1

the question is missing the discount or interest rate that we must use to calculate the answer.

for example, if the interest rate is 5% per year, then this would be a good investment if the homeowner can save $2,481 x 5% = $124.05 per year.

but if the interest rate is 8%, then the homeowner would need to save at least $2,481 x 8% = $198.48 per year.