Question

An energy conservation option has a first cost of $50,000. It requires $4000 per year maintenance and saves $10,000 per year in utilities. What is the simple payback period for the option

Answer 1

8.3333 years or 8 years and 4 months.

Step-by-step explanation:

Initial cost = $50,000

Amount recovered on the investment per year = $10,000 - $4,000 = $6,000

The simple payback period is given by dividing the initial cost by the amount recovered per year:

`n=(\$50,000)/(\$6,000)\\n=8.3333\ years`

The simple payback period is 8.3333 years or 8 years and 4 months.