$1.00 Annual maintenance expense per panel aft year 1 7.00% Grid electricty costs annual inflation 3.00% Other costs inflation 8.00% Hurdle rate/discount rate 30.00% Tax rate 365 Days per year 10 years useful life as per for financial reporting (depreciated straight line). 5 years company tax (depreciated straight line).

All capital expenditure (capex) would be in Year 0 (this year), and solar panel systems would start generating electricity and be depreciated from the beginning of Year 1.

Apply relevant costing principles: only include the incremental costs and cash flows that would differ from installing solar panels. Electricity usage will not differ if solar panels are installed. What will differ is cost and carbon dioxide savings because Central Arizona Storage will not need to purchase the portion of electricity generated by solar panels from the public grid. Depreciation expenses and maintenance expenses will also differ if solar panels are installed. The net of these incremental costs will sum to Earnings Before Interest and Tax (EBIT). Work out EBIT as a base for calculating the incremental cash flows in Year 1 and onwards. Discount the incremental cash flows with the 8.0 percent hurdle rate. Include Year 0 capital expenditure to calculate a net present value (NPV) or to evaluate an internal rate of return (IRR).

Table 1: Quotes for the Outsourced Scenario Warehouse Supply and installation quoted costs North $6,000,000

Table 2: Installation Costs for the Insourced Scenario Warehouse Installation cost estimate North $225,000

Table 3: Electricity Purchase Costs/Credits and Total Electricity Usage Project Yr 1 Public electricity grid: Purchase cost/credits per kWh Yr 1 total electricity usage kWh North $0.34 12,000,000

Table 4: Solar System Sizes and Capacities Project Solar system size: Panels (each 1 sqm) Total solar system capacity kW Sun exposure: Average daily kWh produced per kW of capacity North 6,000 1,020 8.9

provide table for below both scenarios

Fill Outsourced data for years 0 to 10

Grid Electricity Expenses Maintenance Expenses Accounting Depreciation EBIT

EBITDA Capex Tax Depreciation Tax cash flow Cashflows

NPV (in $000s) IRR

Fill Insourced data for years 0 to 10

Grid Electricity Expenses Maintenance Expenses Accounting Depreciation EBIT

EBITDA Purchase cost per panel Panel Capex Install Capex Total Capex Tax Depreciation Tax cash flow Cashflows

NPV (in $000s) ? IRR ?