Question: Eric is thinking about installing some solar panels on his home that would reduce his annual energy bill to $0. The panels cost $8,000.00 to

Eric is thinking about installing some solar panels on his home that would reduce his annual energy bill to $0. The panels cost $8,000.00 to install, and the market interest rate is 10.00%.

Part A: If Eric decides not to install the solar panels, his electricity bill will be $1,300.00 per year indefinitely. What is the present value of these payments if we assume that they will go on forever?

Part B: What is the maximum Eric would be willing to pay to install the solar panels now, assuming he only values the solar panels for their effect on his electricity bill?

Part C: If Eric only has to pay $8,000.00 for the solar panels, what is his net gain for installing them?

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