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XIRR double check, please?
Old 07-29-2017, 12:53 PM   #1
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XIRR double check, please?

I have a large, old upright freezer in the basement that I finally got around to putting a Kill-A-Watt on and the power consumption is breathtaking. Armed with good consumption data, I am crunching the numbers on buying a modern replacement. It has been a long time since I did XIRR calcs in Excel and I would appreciate it if someone could check my math.

I took the difference between the monster's power usage and the stated annual power consumption of an inexpensive option at Home Depot, multiplied it by my marginal per kwh cost of power and assumed that the annual savings would be received all at once in one year's time and every year thereafter for 10 years (then no cash flows). So $625 of cash out on 8/1/17 and then a series of cash flows in for 10 years starting 8/1/18. The cash flows in start at 121.29 and rise 2% annually (very conservative assumption based on my utility). I get an XIRR of 16.1% and a payback period of 5 years.

This seems like a no-brainer on a low risk proposition, no?
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Old 07-29-2017, 01:02 PM   #2
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Darn! Where's my Kill-a-Watt? My fridges are all old.
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Old 07-29-2017, 01:07 PM   #3
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Darn! Where's my Kill-a-Watt? My fridges are all old.
I was too cheap to buy one and stumbled across one for borrowing at the library.
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Old 07-29-2017, 01:10 PM   #4
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I get 16.1% as well... -$625 at time zero and $121.29 at time 1, increasing 2% annually for 10 years in total. I used IRR but it is the same because the cash flows are 1 year apart.
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Old 07-29-2017, 01:23 PM   #5
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Thanks!
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Old 07-29-2017, 01:37 PM   #6
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The new one won't last 10 years and you do not want an auto-defrost freezer for long term storage. My last upright blew the compressor at around three years plus it was an auto-defrost. Food did not last six months. Never again. Next time it will be a manual defrost chest freezer. Energy efficiency be damned.
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Old 07-29-2017, 02:06 PM   #7
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The new one won't last 10 years and you do not want an auto-defrost freezer for long term storage. My last upright blew the compressor at around three years plus it was an auto-defrost. Food did not last six months. Never again. Next time it will be a manual defrost chest freezer. Energy efficiency be damned.

Chest freezers are very efficient, I find it is too easy to lose stuff in them.
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Old 07-29-2017, 02:10 PM   #8
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The sacrifice of quality for convenience is not one I would make. I agree about forgetting stuff. Nothing like a dessicated something that has been in there long enough for the label to fade.
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Old 07-29-2017, 02:20 PM   #9
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Perhaps, but at triple the power consumption it isn't hard to see enough payback pretty quickly to make it worth the risk, methinks.
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Old 07-29-2017, 02:54 PM   #10
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I was too cheap to buy one and stumbled across one for borrowing at the library.
I bought my own to do some experiments. I recall measuring the power consumption of my 2nd fridge which is an old 18 cf. My wife likes to stock up on food sale items, hence that 2nd fridge in the utility room in addition to the main 30 cf fridge in the kitchen.

I found the record I took in 2015. That fridge drew 51 kWh in 2 weeks, which projects to 1329 kWh/year. Converted to a percentage of the total annual electric consumption, then to a pro-rated dollar amount, it becomes $156/yr.

I did not go further to investigate what a new 18 cf fridge would have drawn. Preferably we would get rid of that fridge, but I have no luck in persuading my wife that the main 30 cf fridge is plenty for 2.
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Old 07-29-2017, 03:13 PM   #11
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, but I have no luck in persuading my wife that the main 30 cf fridge is plenty for 2.
Dang, 30cuft - that is a biiiiig fridge! I thought ours was supersized at 22......
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Old 07-29-2017, 03:24 PM   #12
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The weird thing is that she eats little. A lot of stuff, she says she buys for me. And I cannot eat that much either. So, I reply "let me buy what I eat", and she gets offended. Can't win!

My wife does not go out to shop for clothes, or shoes. So, I guess having to throw away some food sometimes is a lot cheaper than her buying Jimmy Choo shoes.

But I draw the line at eating freezer-burnt meat, so have to get involved to help sort things out and prioritize what has be eaten first. I now have a file inventory of the contents of the two fridge freezer compartments on the cloud, accessible from smart phones, laptops, netbooks, desktops. And I have to maintain it. Oh, what a guy has to do.

Oh, just recall I do not yet have an inventory of the fridge in the 2nd home.
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Old 07-30-2017, 11:19 AM   #13
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Don't forget to check for rebates and bounty programs. Our 2nd fridge replaced a 35 yo Amana. The replacement wasn't fancy enough to get a rebate but the local utility pays $50 bounty for working units and hauls them away. We went with Home Depot too and the delivery guy seemed annoyed that we weren't using their free disposal service. I'm going to the library tomorrow.
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Old 07-30-2017, 11:31 AM   #14
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I have DMIL's 1947 International Harvester Fridge running in the winery/garage. I will not part with it until it gives its final gasp. It keeps my homebrew kegs and cold stabilizes my wines at 36 degrees year round at a #2 setting out of 9.

Here in coal country we pay 6.95cents/KWH.
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Old 07-30-2017, 11:35 AM   #15
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Another perspective: is it cost effective to have a deep freeze? unless you are a hunter, I think the cost of the unit plus energy cost and risk of lost/spoiled/freezer burn food makes it a question.

For just us we have a counter depth fridge/freezer and it is plenty. I find they run sales often enough I can easily stay stocked with good values on steaks, roasts, etc. And very little ever goes to waste as I can see it all.

Just an idea.
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Old 07-30-2017, 11:37 AM   #16
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Another perspective: is it cost effective to have a deep freeze? unless you are a hunter, I think the cost of the unit plus energy cost and risk of lost/spoiled/freezer burn food makes it a question.

For just us we have a counter depth fridge/freezer and it is plenty. I find they run sales often enough I can easily stay stocked with good values on steaks, roasts, etc. And very little ever goes to waste as I can see it all.

Just an idea.
I am a hunter and am feeding two growing kids. Yes, the freezer is unquestionably worth it to us.
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Old 07-30-2017, 11:43 AM   #17
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Include a 4% opportunity cost on the $625. $25 cuts into your $121, extending the payback a few years. Maybe still close to a no-brainer for you.

But the old ones run and run. Not sure the new ones will be as reliable, but they sure ought to make it to 5-7 years.

I think just using 625 ∕ (121 − 25) ≈ 6.5 years is close enough.

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Old 07-30-2017, 12:06 PM   #18
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Include a 4% opportunity cost on the $625. $25 cuts into your $121, extending the payback a few years. Maybe still close to a no-brainer for you.

But the old ones run and run. Not sure the new ones will be as reliable, but they sure ought to make it to 5-7 years.

I think just using 625 ∕ (121 − 25) ≈ 6.5 years is close enough.

-ERD50
Don't need to do that, I just need to compare the IRR to alternative opportunities of similar risk to figure out what is the most attractive. 3 to 4% for alternatives seems about right.
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Old 07-30-2017, 12:25 PM   #19
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... the stated annual power consumption of an inexpensive option at Home Depot ... This seems like a no-brainer on a low risk proposition, no?
My guess is that you have a garbage-in, gospel-out situation. If power consumption is like every other government-mandated piece of consumer information you can be sure that the freezer manufacturer gamed the testing or, like VW, outright cheated.

If it were me, I would ditch the Excel and lurk on CraigsList waiting for a suitable freezer with an energy star sticker still on it. It will probably cost you half or less compared to a comparable quality new one, so you can be pretty sure that any numerical gyrations you do will be favorable. Without bothering to do them. I'd watch especially for "moving sales" where the freezer must be sold, hence the negotiated price is likely to be friendly.

Alternatively, shop all the appliance stores in your area for a demo or a scratch & dent special. You are not in a hurry, so you can take your time watching for deals. If there are commissioned salespeople involved, ask one to watch for you and promise to buy from them if they bird dog a good deal for you.
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Old 07-30-2017, 12:56 PM   #20
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My guess is that you have a garbage-in, gospel-out situation. If power consumption is like every other government-mandated piece of consumer information you can be sure that the freezer manufacturer gamed the testing or, like VW, outright cheated.

If it were me, I would ditch the Excel and lurk on CraigsList waiting for a suitable freezer with an energy star sticker still on it. It will probably cost you half or less compared to a comparable quality new one, so you can be pretty sure that any numerical gyrations you do will be favorable. Without bothering to do them. I'd watch especially for "moving sales" where the freezer must be sold, hence the negotiated price is likely to be friendly.

Alternatively, shop all the appliance stores in your area for a demo or a scratch & dent special. You are not in a hurry, so you can take your time watching for deals. If there are commissioned salespeople involved, ask one to watch for you and promise to buy from them if they bird dog a good deal for you.
Not a bad idea except for one deal killer: there is no way I can get a 200 pound freezer down the basement stairs.
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