Your annual bonus this year was $15,000. You decide to use the money to remodel your bathroom or install solar panels on your roof. In either case, you will spend the entire $15,000.
If you install solar panels, you will save $100 per month on your electric bill, each month, for 120 months, starting next month.
If you remodel your bathroom, you expect to increase the value of the house by $9,000 today.
If your investments earn 4% APR (compounded monthly), which alternative adds more to (or subtracts less from) your wealth in present value terms and by how much?
The solar panels lose less by $877
The solar panels lose less by $890
Remodeling the bathroom losses less by $890
Remodeling the bathroom losses less by $877