1. You are investigating the feasibility of installing a solar system at your house. You are thinking of installing 20 panels. Each panel has a capacity of 240 W. The current average cost for panels, including installation, is around $4.50/W. The solar cells are expected to operate at around 13% capacity. You will get a federal tax rebate worth 30% of the installation cost. You will also get a rebate from the state of New Jersey.

Obviously, installing the system would save you every year what you would spend on energy. Assuming an energy cost of $0.17 per kWh and that the cells operate for 25 years at 13% capacity continuously (this means that they operate 8760 hours per year) and that you consume everything that your system generates :

1. 1.DeterminetheNPVfordiscountratesbetween1%to5%withanincrementof1%(thisistheopportunitycostofyourmoneysaywhatyouwouldgetinamoneymarketaccount)
2. 2.Indecidingwhetherornottodothisprojectthestaterebateisimportant.Howmuchshouldbethestaterebatetomaketheprojectappealingtoyouineachofthecasesconsidered.
3. 3.Because the price of energy is volatile you are not happy with your previous computations and you would like to wait one year to see where prices go. If you assume that the PV of the savings have a volatility (standard deviation) of 30% and that the one year T-bill is 3% what would be the state rebate for each case computed that would convince you not to wait one year and invest right away.
4. 4.Comparetheresultsatpoint2andpoint3

NOTE: The relationship between W and kWh is the relationship between power (kW) and energy (kWh). Thus multiplied by time. Also, .