TVM question about NPV with an infinite term???

Question

4: Investment Criteria

I understand how to find the NPV, but how do I solve if i have an infinite term?

Here's the problem:

My office needs to be insulated. Doing so will cost 10,000 but it will save me 1,000 per month in heating expenses. The savings last forever. (according to this problem)

Find the NPV and IRR

I don't know how to do this with an indefinate term

NPV = C_t/(1+r^t )

Answer 1

Actually, nothing lasts forever.  For something of this sort 10 years would be about the longest payback period one should consider.  6 years might be considered a more pessimistic term.  You might use both to see the difference between the two.  

Answer 2

You are trying to find what's called the present value of a perpetuity (ie perpetual).

Look here.

http://en.wikipedia.org/wiki/Present_val...