Phil L wrote:
wrote:
Phil L wrote:
marvelus wrote:
On Fri, 18 Aug 2006 17:02:06 GMT, "Phil L"
wrote:
wrote:
It's a lot more expensive than normal CWI, so much so that it
will never turn a profit - you will never save as much as it has
cost for installing,
You mean the return is less than mortgage interest rates? As long
as the return is higher than this wont it pay for itself
eventually. Also, if fuel prices rise wont the pay back time
reduce?
snip
If he spends £500 on conventional CWI, and saves £60 per year, he
will have broke even in less than 20 years, everything after that is
profit.
If on the other hand he chooses to have exterior insulation, it will
cost him probably £3,500 and save him less than £60 per year - with
me so far? - this means it will take him at least 58 years just to
break even.
snip
Obviously the 20 years should have read as 10 years, 500 divided by 60 is
easy enough to work out.
You've forgotten depreciation, return-on-investment, opportunity costs,
cost of capital, and all the other things accountants like to bamboozle
us lesser mortals with.
Think of it this way. Assume, for the sake of argument, you can get 5%
interest on money.
Invest 500 pounds. After 1 year, you have 525 pounds (25 pounds more).
After 10 years you'd have about 814 pounds (314 pounds more), after 15
years about 1039 pounds (539 pounds more), and after 20 years you'd
have about 1,326 pounds (826 pounds more).
Spend 500 pounds on insulation. After 1 year, you save 60 pounds,
meaning you are only 440 pounds in the red. After 10 years you have
saved 600 pounds, putting you 100 pounds in the black but you still
have 214 pounds less than if you had invested the money instead. After
15 years you have saved 900 pounds, putting you 400 pounds in the
black, but still 139 pounds less than if you had invested the money,
and after 20 years, you have saved 1200 pounds, putting you 700 pounds
in the black, but STILL less than if you had invested the money.
Now you can argue over 5% is reasonable, and whether your cost savings
would improve as the price of fuel increases, and maybe you have had
the benefit of a warmer house - (all things that accountants have fun
with), but payback is not simple.
Cheers,
Sid