Question: Assume that purchasing a more energy efficient (but otherwise equivalent) water heater will cost an additional $500 up-front and saves 500 kWh per year in

Assume that purchasing a more energy efficient (but otherwise equivalent) water heater will cost an additional $500 up-front and saves 500 kWh per year in energy ($50/year in energy costs at 10 cents per kWh) for fifteen years. Assume energy bills are due at the end of the year. Assume an annual discount rate of 10%.

a. What is the NPV of this investment?

b. What is the cost of saved energy for this investment?

c. Explain what your "cost of saved energy" answer from means in a way that would be understandable to a high-school senior?

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