In southern California a photovoltaic (PV) system for a certain home costs $28,000 for parts and installation. This 6.1 kW system requires 350 ft of rooftop space and has an estimated life of 20 years. a. If this PV system saves $200 each month in electricity expenses, what is the simple payback period in months? b. If the market value of the PV system is negligible, what is the system's IRR?

In southern California a photovoltaic (PV) system for a certain home costs $28,000 for parts and installation. This 6.1 kW system requires 350 ft of rooftop space and has an estimated life of 20 years. a. If this PV system saves $200 each month in electricity expenses, what is the simple payback period in months? b. If the market value of the PV system is negligible, what is the system's IRR?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $450 per unit and sales volume to be 1,200 units in year 1; 1,325 units in year 2; and 1,000 units in year 3. The project has a 3-year life. Variable costs amount to $250 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $150,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $30,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow
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4
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You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units In year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What change in NWC occurs at the end of year 1? (Enter a decrease as a negative amount using a minus sign.) Decrease of

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