Answer: Payback time = 0.0075
Explanation: Since payback time is calculated as:
payback time = [tex]\frac{installation cost}{annual savings}[/tex]
First determine the installation cost:
100 mm thick insulation covers 8.3 m². Then 300 mm covers 24.9 m².
To cover 8.3m² costs £20. Then, the cost to cover 24.9 m² is:
cost = [tex]\frac{20*24.9}{8.3}[/tex]
cost = £60
The cost of putting the insulation is £120, so the total cost is:
total cost = £60 + £120
total cost = £180
Savings per year per 100 mm thick is £80. For 300 mm, the value of annual savings is:
savings = [tex]\frac{300*80}{100}[/tex]
savings = 240
payback time = [tex]\frac{installation cost}{annual savings}[/tex]
payback time = [tex]\frac{180}{240}[/tex]
payback time = 0.75
