. NorQuest College is considering upgrading all the lighting in CELT to LEDs. The college is supportive of the project but first needs to understand the finances. Typically, the College expects payback within 3 years to align with normal capital budget decision making. Installation of the LED lighting = $269,900 Expected energy savings = $50,000 per year for 10 years The College secured a loan for $269,900 to cover the capital cost. The loan has an interest rate of 6.79%. NorQuest College is a not for profit organization; however, they would like additional some additional return to ensure the project is feasible. Therefore, the required rate of return is 5.75 %. Using the information above: (Round all calculations to 2 decimal places) 1. Calculate the payback. (1 mark) 2. Calculate the discounted payback. (3 marks) 3. Calculate the Net Present Value. (3 marks) 4. Calculate the IRR of the project. (3 marks) 5. Based on the calculations above, should NorQuest upgrade all the lighting in CELT to LEDs? (1 mark) 6. Explain how you have arrived at your decision to accept or decline this project. Include an explanation of how each calculation was considered in arriving at your decision. (5 marks) 7. If you were completing a full Net Present Value analysis, you would estimate the relevant cash flows by projecting operating costs and cost savings. (3 marks) What are operational costs? What are capital costs? How can you differentiate between an operational and capital cost? 1 1 18 19 20 21 22 23 24 25 26 27 28 a