You own a rental building in the city and are interested in replacing the heating system. You are faced with the following alternatives:
a. A solar heating system, which will cost $ 12,000 to install and $ 500 a year to run and will last forever (assume that your building will too).
b. A gas-heating system, which will cost $ 5,000 to install and $ 1000 a year to run and will last 20 years. c. An oil-heating system, which will cost $ 3,500 to install and $ 1200 a year to run and will last 15 years. If your opportunity cost is 10%, which of these three options is best for you?