Assume that, if you undertake the project, you can alternatively install a different energy system that is more environmentally friendly energy system (e.g., solar or fuel cells) that requires an incremental investment of $19 million and is expected to lead to incrementally higher energy costs for a while (reducing after-tax cash flows by $3 million per year for the first 4 years of the project) but result in incrementally lower energy costs thereafter (increasing after-tax cash flows by $8 million per year from year 5 through year 20 of the project). Compute the incremental NPV of this alternative energy system . COST OF EQUITY = 4.668%

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R u s A Study Pack Practice Assume that if you undertake the project, you can alternatively install a different energy system that is more environmentally friendly energy system leg solar or fuel cells that requires an incremental investment of $19 million and is expected to lead to incrementally higher energy costs for a while reducing after-tax cash flows by $3 million per year for the first 4 years of the project, but result in incrementally lower energy costs thereafter increasing after-tax cash flows by S8 m on per year from year 5 through year 20 of the project Compute the incremental NPV of this alternative energy system COST OF EQUITY = 4.668% Expert Answer Cash flows PVIF 04.668% Present value 1.000 S -19.00 0.955 $ 2.87 0.913 2.7 0.87215 0.833 $ 0.796 0.761 $ 0.727 $ 0.694 0.663 5 0.634 S 0.6053 0.5785 32 5 0.504 0.482