Determining and evaluating project cash flows for a home solar system You are keen on the use of solar power and have decided to evaluate investing in a solar system for your home. After consulting with several solar contractors, you have learned that the installed cost of solar systems is about $2.21 per kilowatt hour (kWh) of rated production, and best practice is to install a solar system equal in capacity to your annual electric consumption. You consume 12,000 kWh a year at a current cost of $0.13 per kWh, and you expect costs per kWh to increase 1.45% per year. For the first year of operation you will receive a tax rebate equal to 22% of the installed cost of the solar system, and your marginal tax rate is 24%. Finally, because solar systems have an indefinite life expectancy you expect your savings on electricity to continue in perpetuity. Use the information you have gathered to determine the following:

a. The initial cash flow.

b. The periodic cash flow for the first 10 years.

c. Terminal cash flow for year 10.

d. The net present value of the project cash flows using a 5% discount rate.