You consider to replace the existing source of electrical
supply of your company
with an array of solar panels. The net investment cost of the
panels installed is $4,250. Based
on an energy audit, the existing electricity usage of your
company is 2520 kilowatt hours
(kWh) of electricity per year. Current price of the
electricity is $0.15 per kWh. Because of the
epidemic, it has been estimated that energy consumption of the
company would not change,
but starting from the year three, price of electricity will
increase by $0.01 until the end of the
project lifetime.
a. What is the IRR of this investment if the solar panels have
a lifetime of 12 years?
b. What is AW of this project at MARR= 3%.