Should you install solar panels on your home? The cost of the panels is $37,496.36 today and will save $50 per months on average for 360 months. In addition, assume you are eligible for a 30% tax credit on installation cost (assume received in one year). What is the NPV, IRR and payback of the solar panels for 360 Months (useful life).

Information given

Initial disbursement $ 37,496.36

Credit on your Tax return 30%

Monthly Savings $ 50 per month

Project Life 360 months

Costs at the end of the project $ 500.00

Cost of Capital before taxes 3.35% APR If you were to invest in the installation of solar panels in your home

Tax Rate 38%

1) Calculate using NPV and PayBack if it is convenient to install the solar panels,

Calculated for each of the calculations, comment if you must approve the project

Cost of Capital after taxes 2.077% APR 2) Now repeat the payback calculation using 65% instead of 30% as a credit on your tax return

Monthly Capital Cost 0.173% per month 3) What are the implications of a higher or lower investment credit in making project decisions.