A geothermal heat pump can save up to 80% of the annual heating and cooling bills of a certain home in the northeastern U.S. In this region, the yearly cost of conventionally heating and cooling a 2,000 square foot house is about $2, 500. With a federal tax credit of 30% on the total installation of the system, how much can a homeowner afford to spend for a geothermal heat pump if the interest rate is 10% per year? The expected life of the heat pump is 14 years.
Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year.
The maximum amount a homeowner can afford to spend for a geothermal heat pump is (Round to the nearest dollar)