please show all work and equations Louis is considering installing solar panels
ID: 3177767 • Letter: P
Question
please show all work and equations
Louis is considering installing solar panels on the roof of his home in Sun City, Arizona. If he goes forward, he will pay the installation firm $70 a month for 20 years but will save money on his electric bill. The amount he will save depends on the amount of sun that Sun City will receive. Every day of sun will save him $3.50. He assumes that the number of days of sun in the next 20 years will be similar to the sunshine in the past, but he is not sure how many days of sun that Sun City normally receives every year. In round numbers, he would estimate the probability distribution as follows: the probability of 200 days of sun is 15%; the probability of 250 days of sun is 25%; the probability of 300 days of sun is 40%; and the probability of 350 days of sun is 20%. What is the expected value of perfect information about how many days of sun that Sun City normally receives every year? (Consider the entire 20-year time horizon-do not consider the time value of money for this problem.)Explanation / Answer
Number of days of sun in a year, if the information is perfect = 0.15x200+ 0.25x250+ 0.4x300 + 0.2x350
= 282.5 days
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