An energy company is evaluating the feasibility of a new solar farm. The following information is available:

Initial Investment:

•Land: $300,000

•Equipment: $700,000

Annual Savings and Costs:

•Year 1 Savings: $150,000

•Year 1 Costs: $50,000

•Year 2 Savings: $200,000

•Year 2 Costs: $60,000

•Year 3 Savings: $250,000

•Year 3 Costs: $70,000

•Year 4 Savings: $300,000

•Year 4 Costs: $80,000

•Year 5 Savings: $350,000

•Year 5 Costs: $90,000

Requirements:

1.Calculate the payback period.

2.Compute the net present value (NPV) assuming a discount rate of 8%.

3.Determine the profitability index (PI).

4.Assess the internal rate of return (IRR).

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