Using Excel Functions, determine the discounted cash flow of the following purch
ID: 2446272 • Letter: U
Question
Using Excel Functions, determine the discounted cash flow of the following purchase of solar panels given a required rate of return of 8 percent and whether the company should invest in the project given a project cost of approximately $2M.
Year
1
2
3
4
5
6
Tax Credit
$ 600,000
$ 49,467
$ 49,467
$ 49,467
$ 49,467
$ 49,467
Depreciation
0
795,741
477,445
286,467
171,880
103,128
Net Energy Bill Savings
0
11,279
11,949
12,631
13,329
14,041
Installation, Operation, & Maintenance Costs
(1,989,353)
(6,957)
(6,957)
(6,957)
(6,957)
(6,957)
Total Annual Net Cash Flow
($1,389,353)
$849,530
$531,904
$341,608
$227,719
$159,679
Cumulative Net Cash Flow
($1,389,353)
($539,823)
($7,919)
$333,689
$561,408
$721,087
Year
1
2
3
4
5
6
Tax Credit
$ 600,000
$ 49,467
$ 49,467
$ 49,467
$ 49,467
$ 49,467
Depreciation
0
795,741
477,445
286,467
171,880
103,128
Net Energy Bill Savings
0
11,279
11,949
12,631
13,329
14,041
Installation, Operation, & Maintenance Costs
(1,989,353)
(6,957)
(6,957)
(6,957)
(6,957)
(6,957)
Total Annual Net Cash Flow
($1,389,353)
$849,530
$531,904
$341,608
$227,719
$159,679
Cumulative Net Cash Flow
($1,389,353)
($539,823)
($7,919)
$333,689
$561,408
$721,087
Explanation / Answer
Answer:
The discounted cashflow is as follows:
The company should not invest in the project, as it offers negetive NPV.
Year Cashflow(in$) Discount factor @8% Discounted Cashflow 0 -2000000 1 -2000000 1 -1389353 0.9259 -1286401.94 2 849530 0.8573 728302.07 3 531904 0.7938 422225.40 4 341608 0.7350 251081.88 5 227719 0.6806 154985.55 6 159679 0.6302 100629.71 NPV = -1629177.34Related Questions
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