Question

In 2010, the University of Texas at Arlington received a $1.8 million grant from the state of Texas to install solar panels on top of the new garage to be built. If the panels are run efficiently, they can be expected to generate 1.2 million kwh per year over its 20-year expected lifespan.

a. Suppose the grant were a loan. If the interest rate were 10%, what annual payment would the university have to pay on a 20 year, $1.8 million loan? (That is $1.8million is the present value of what annual payment?)

b. What is the annual loan payment per kwh produced?

c. If the alternative for the university is to purchase electricity at $0.10 per kwh, is this a good deal for the university?

d. Since the state of Texas pays for the electricity either way, is this a good deal for the state of Texas?

Answer 1

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