Anita Tahani, who owns a travel agency, bought an old house to use as her business office. She found that the ceiling was poorly insulated and that the heat loss could be cut significantly if six inches of foam insulation were installed. She estimated that, with the insulation, she could cut the heating bill by $40 per month and the airconditioning cost hy $25 per month. Assuming that the summer season is three months (June, July, and August) of the year and that the winter season is another three months (December, January, and February) of the year, what's the most that Anita can spend on insulation that would make installation worthwhile, given that she expects to keep the property for five years? Assume that neither heating nor air conditioning would be required during the fall and spring seasons. If she decides to install the insulation, it will be done at the beginning of May. Anita's interest rate is 9% compounded monthly.
Anita Tahani, who owns a travel agency, bought
an old house to use as her business office. She
found that the ceiling was poorly insulated and
that the heat loss could be cut significantly if six
inches of foam insulation were installed. She estimated
that, with the insulation, she could cut
the heating bill by $40 per month and the airconditioning
cost hy $25 per month. Assuming
that the summer season is three months (June,
July, and August) of the year and that the winter
season is another three months (December, January,
and February) of the year, what's the most
that Anita can spend on insulation that would
make installation worthwhile, given that she expects
to keep the property for five years? Assume
that neither heating nor air conditioning
would be required during the fall and spring
seasons. If she decides to install the insulation, it
will be done at the beginning of May. Anita's interest
rate is 9% compounded monthly.
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