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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Case Study 2 IKEA is considering converting its all Australian stores into eco stores by installing solar system. The goal is to generate its own electricity with excess electricity to be sold to Origin Energy. The quotation received from various solar companies showed that in the initial phase, the generated electricity would be just enough to meet the demands of stores with no excess capacity. The system will improve the carbon foot printing of the company and will reduce the cost of Carbon trading under Carbon emission trading scheme which is done every two years. The operating characteristics are as follows: Initial outlay for new equipment 20-year life no residual $ 1887,645 value Annual operating cost over 20-year life $ 67, 994 10% p.a. $ 995, 987 $ 8900 Depreciation Savings in electricity due to own generation Total cost of cleaning and maintaining the system every 5 years 1. Calculate summary of the total cost of solar system for next 20 years 2. Should IKEA invest in this new system even if it is uneconomic
Transcribed Image Text:Case Study 2 IKEA is considering converting its all Australian stores into eco stores by installing solar system. The goal is to generate its own electricity with excess electricity to be sold to Origin Energy. The quotation received from various solar companies showed that in the initial phase, the generated electricity would be just enough to meet the demands of stores with no excess capacity. The system will improve the carbon foot printing of the company and will reduce the cost of Carbon trading under Carbon emission trading scheme which is done every two years. The operating characteristics are as follows: Initial outlay for new equipment 20-year life no residual $ 1887,645 value Annual operating cost over 20-year life $ 67, 994 10% p.a. $ 995, 987 $ 8900 Depreciation Savings in electricity due to own generation Total cost of cleaning and maintaining the system every 5 years 1. Calculate summary of the total cost of solar system for next 20 years 2. Should IKEA invest in this new system even if it is uneconomic
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