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In this? problem, we consider replacing an existing electrical water heater with an array of solar panels. The net installed investment cost of the panels is ?$1,300 ?($2,000 less a 35?% tax credit from the? government). Based on an energy? audit, the existing water heater uses 180 kilowatt hours? (kWh) of electricity per? month, so at ?$0.12 per? kWh, the cost of operating the water heater is ?$ 21.6 per month. Assuming the solar panels can save the entire cost of heating water with? electricity, answer the following questions.

a. What is the simple payback period for the solar? panels?

b. What is the IRR of this investment if the solar panels have a life of 11 ?years?

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Financial Management, Finance

Category:- Financial Management
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