Calculate the NPV of the solar panel project for both 30 years and 12 years. Briefly summarize and/or interpret the results.
Assumptions for Case: Size, kW cost per kw Efficiency rating annual degradation 15 kW $7,000 $ per kW 18% % 0.50% % Total cost $ end-of-life salvag value to deprecia $ 105,000.00 15% 89,250.00 SIP rate system rating design factor $1.95 per W 12585 W 0.9 tax rate tax credit 38% of profits 30% of system cost Notes: 1) Electricity generation for year 1 is in cell B36 based on a formula in that cell. For each succeeding year electricity generation declines by 0.5%, as stated in the case. 2) The hurdle rate or discount rate is in cell B30 and based on an after-tax rate, since all of the cash flows are adjusted for taxes. 3) The formula for the Solar Incentive Program (SIP) is in cell B64. 4) Total cash flow for the payback method is the formula in cell 071. 5) Number of years for payback is in cell B74. 6) Initially assume straight line depreciation over 5 years; in question 3) you will use accelerated depreciation based on MACRS. Electricity cost annual increase $0.17 per kWh 3% maintainance annual increase $15 per kW 2% insurance annual increase 0.30% of total cost 2% hurdle rate 3.53% year electricity cost electricity generation kW electricity cost savings 1 $0.17 23652 $4,020.84 $15 maintainance cost per kW total maint cost (based on 15kW) insurance cost total insurance 0.30% 315.00 $ $3,705.84 total cost savings tax on cost savings Depreciation Tax savings from depreciation Net savings $3,705.84 NPV of net savings (30) NPV of net savings (127) Tax incentive $ 31,500.00 NPV w tax incentive, 30 NPV w tax incentive, 12y SIP $22,086.68 Tax on SIP Net SIP NPV w tax inc and SIP, 30 NPV w tax inc and SIP, 12y $ $ Assumptions for Case: Size, kW cost per kw Efficiency rating annual degradation 15 kW $7,000 $ per kW 18% % 0.50% % Total cost $ end-of-life salvag value to deprecia $ 105,000.00 15% 89,250.00 SIP rate system rating design factor $1.95 per W 12585 W 0.9 tax rate tax credit 38% of profits 30% of system cost Notes: 1) Electricity generation for year 1 is in cell B36 based on a formula in that cell. For each succeeding year electricity generation declines by 0.5%, as stated in the case. 2) The hurdle rate or discount rate is in cell B30 and based on an after-tax rate, since all of the cash flows are adjusted for taxes. 3) The formula for the Solar Incentive Program (SIP) is in cell B64. 4) Total cash flow for the payback method is the formula in cell 071. 5) Number of years for payback is in cell B74. 6) Initially assume straight line depreciation over 5 years; in question 3) you will use accelerated depreciation based on MACRS. Electricity cost annual increase $0.17 per kWh 3% maintainance annual increase $15 per kW 2% insurance annual increase 0.30% of total cost 2% hurdle rate 3.53% year electricity cost electricity generation kW electricity cost savings 1 $0.17 23652 $4,020.84 $15 maintainance cost per kW total maint cost (based on 15kW) insurance cost total insurance 0.30% 315.00 $ $3,705.84 total cost savings tax on cost savings Depreciation Tax savings from depreciation Net savings $3,705.84 NPV of net savings (30) NPV of net savings (127) Tax incentive $ 31,500.00 NPV w tax incentive, 30 NPV w tax incentive, 12y SIP $22,086.68 Tax on SIP Net SIP NPV w tax inc and SIP, 30 NPV w tax inc and SIP, 12y $ $
