Question

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%.

Answer 1