It is proposed to install thermal insulation in a residence to save on the summer-monsoon season air-conditioning costs. The estimated yearly saving is 20 thousand rupees. The cost of installation of the insulation is 150 thousand rupees. The life of the insulation is 12 years. For a compound interest rate of 9% per annum, the minimum salvage value of the insulation for which the proposal is competitive, is ____ thousand rupees (rounded off to nearest integer).

Question

Accepted Answer

The correct answer is 18 to 20. GATE 2025 official key: 18 to 20 thousand rupees. Setting NPV = 0: −150 + 20×PVIFA(9%,12) + S×PVIF(9%,12) = 0. PVIFA(9%,12) ≈ 7.161, so −150+143.2+0.3555S=0, giving S ≈ 19.