Question

Calculate the payback time if she insulates the loft with 300 mm insulation when: area of loft space = 100m^2 cost of roll of 100 mm thick loft insulation that covers 8.3m^2 = £20 cost of putting the insulation into the loft = £120 savings per year = £80 per 100 mm Payback Time = installation cost divided by annual savings

Answer 1

Answer: Payback time = 0.0075

Explanation: Since payback time is calculated as:

payback time =
`(installation cost)/(annual savings)`

First determine the installation cost:

100 mm thick insulation covers 8.3 m². Then 300 mm covers 24.9 m².

To cover 8.3m² costs £20. Then, the cost to cover 24.9 m² is:

cost =
`(20*24.9)/(8.3)`

cost = £60

The cost of putting the insulation is £120, so the total cost is:

total cost = £60 + £120

total cost = £180

Savings per year per 100 mm thick is £80. For 300 mm, the value of annual savings is:

savings =
`(300*80)/(100)`

savings = 240

payback time =
`(installation cost)/(annual savings)`

payback time =
`(180)/(240)`

payback time = 0.75