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In 2018, we received two bids for installing solar panels on our roof. Relevant information from the bids appears in the Unit 2 Data Case

In 2018, we received two bids for installing solar panels on our roof. Relevant information from the bids appears in the Unit 2 Data Case Template. The properties of the systems are: Each has an initial cost that is partially offset by a 30% Federal and 15% state tax credit. Each has an initial estimated product in kilo-Watt-hours (kWh) of electricity that is sold back to MidAmerican energy (or offsets our costs at the same rate). o The initial production will degrade, creating a negative annual growth rate for system production for each system. The initial price per kWh and its projected growth rate is the same for each system. The price per kWh times the kWh produced gives the annual savings. The discount rate reflects the opportunity cost of capital, in this case foregoing the return on a long-term CD. You are to complete the following tasks: 1. Linking to information in the Assumptions sheet, compute: a. Forecasts of kilo-Watt-hours (kWh) produced by each system in rows 4 and 15 using the initial forecast for kWhs produced and the (negative) growth rates. b. Forecasts of the value of each kWh produced in rows 5 and 16 based on the initial value/kWh and its expected growth. c. Forecasts of the overall energy cost savings in rows 6 and 17 by multiplying the forecast kWhs produced and value/kWh for each system. d. Forecasts of net cash flows for each system. This includes the net costs at date 0 and the savings each subsequent period. 2. Compute the PV of the cash flows for each system in the Cash Flow Models sheet. 3. Compute the NPV of the cash flows for each system in the Cash Flow Models sheet. 4. Link the PV and NPV back to the Assumptions sheet. 5. Which system would you install? Enter the answer in cell B17 of the Assumptions sheet.

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