The annual cost of operating a heat pump at year-end prices is R, with units of $/yr. The costs are expected to inflate at a yearly rate of f. Money is discounted at the yearly rate of i. The life of the heat pump is n years. The potential cost benefits of the heat pump are to be examined by placing all costs on a uniform annual basis.
A. Show that the uniform annual costs are
What is the PW of R? What is the annual value, Ac, of PW? Simplify the expression for Ac.
B. Compute Ac for R = $7,800.00/yr, f = 5%, n = 25 yr, and i = 10%