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chapter 16
Copyright Cengage Learning. Powered by Cognero.
Page 1
Indicate whether the statement is true or false.
1. Recurring expenses for operating a renewable energy heating system vary from year to year.
a.
True
b.
False
2. The method used to determine monthly owning cost depends on how the installation will be paid for.
a.
True
b.
False
3. A tax credit reduces tax liability more than a tax deduction of the same amount.
a.
True
b.
False
4. Federal subsidies of renewable energy in the form of tax credits greatly increased sales of solar thermal systems during
the mid-1990s.
a.
True
b.
False
5. An increase in the cost of conventional fuel displaced by the renewable energy heat source increases the simple
payback period of the renewable energy solution.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
6. What factor causes the future value of an investment to differ from its present value?
a.
return on investment
b.
payback
c.
interest rate
d.
principal
7. What do straight lines on a simple payback curve imply?
a.
The inflation of fuel cost was included.
b.
The inflation of fuel cost was not included.
c.
The fuel cost was not considered in the calculation.
d.
The installation cost was not considered in the calculation.
8. How is total owning and operating cost used as a financial comparison tool?
a.
The option with the lowest total owning and operating cost is the better financial investment.
b.
The option with the lowest number of years of owning and operating cost is the better financial investment.
c.
The point at which the owning and operating costs intersect when plotted on a graph is the return on
investment.
d.
The total owning and operating cost divided by the monthly operating cost savings is the return on investment.
9. What is annual compounding?
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a.
a chart showing interest rate fluctuations over the life of a loan
b.
a list of varying monthly payments over the life of a loan
c.
the sum of the monthly payments applied to a loan over a one year period
d.
the assumption that accumulated interest is added to the principal once per year
10. How is return on investment calculated?
a.
benefit divided by net cost
b.
benefit minus net cost, divided by net cost
c.
net cost minus benefit, divided by net cost
d.
net cost divided by benefit
11. What time frame is generally used to calculate lost opportunity cost?
a.
10 years
b.
the elapsed time until the loan is repaid
c.
the design life of the system
d.
the time duration until federal tax credits expire
12. What is the purpose of renewable energy tax credits or other rebates?
a.
Temporarily stimulate market growth in a renewable energy sector.
b.
Increase tax revenues.
c.
Reduce tax revenues.
d.
Immediately reduce underlying cost of the technology.
13. How is after-tax lost opportunity cost calculated?
a.
total interest income earned multiplied by percentage of income retained by the owner
b.
total interest income earned multiplied by income tax percentage
c.
installation cost divided by annual operating cost savings
d.
total cost of owning and operating a system on an annual basis
14. What is the simple payback of a renewable energy heating system?
a.
the installation cost divided by the annual operating cost savings
b.
the number of years required for the investment to repay the higher initial cost using the savings it generates,
relative to that of a conventional system
c.
the number of years required for the annual operating cost savings to equal the installation cost
d.
the installation cost divided by the difference between the installation cost of the system and a conventional
system
15. What is the term of a loan?
a.
the time period over which it must be repaid
b.
the time period during which the interest rate remains constant
c.
the maximum percentage the interest rate can rise, for a variable rate loan
d.
the number of months elapsed until the principal and interest portions of the monthly payment are equal
16. What happens during the time after the simple payback point?
a.
The conventional system produces a lower total cost.
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b.
The renewable energy system produces a lower total cost.
c.
The conventional system and the renewable energy system have identical costs.
d.
The conventional system becomes less reliable.
17. Which factor is of primary importance in deciding whether to purchase a renewable energy heating system?
a.
installation cost
b.
operating cost
c.
desire to protect the environment
d.
a variety of factors, depending on the individual
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chapter 16
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Answer Key
