A$.$n engineering design firm is considering the use of solar power for its stand$-$alone office. Two options are being considered: $(1)$

continue to use electric power from the grid; and $(2)$ remain connected to the grid but use solar with net metering to feed back into the

grid when excess power is generated, resulting in a credit for future use. Energy rates anticipated for the upcoming year, per kilowatt$-$

hour $($kwh$),$ are approximately $$0\mathrm{.}10$ for off$-$peak pricing and $$0\mathrm{.}18$ for on$-$peak pricing. These prices are expected to increase annually

at a rate of $9\mathrm{.}0\%$ and $7\mathrm{.}3\%,$ respectively. Annual demand is estimated to be $7,220kwh$ during hours considered to be $"$on$-$peak" with all

being during daylight hours when solar panels are effective. "Off$-$peak" annual demand is $7,700$ kwh when the sun is available, and

$8,640kwh$ when there is lack of sun. For Option $1,$ costs include the energy charges for kwh used during on$-$and off$-$peak times, plus a

monthly "service charge" of $$55$ simply for having access, regardless of kwh used. For Option $2,$ in addition to the monthly "service

charge," a $5$ kw solar capacity with inverter, charge controller, current limiter$,$ and interfacing will be used with no storage capacity at a

cost of $$25,000$; part of the demand will be provided by the solar array, and the rest $($particularly at night and when there is lack of sun$)$

will be provided by the utility company $($the grid$).$ Excess energy from the solar array will be fed back into the grid and credited back to

the engineering design firm. Annual maintenance and testing will cost $$250$ the first year, increasing by $$80$ each year thereafter. The

salvage value after $8$ years will be $$3,000.$ Following are the annual kwh figures for each option:

Part a

Company management wants to decide between the two alternatives. The planning horizon is $8$ years and annual interest is $8\%.$

Determine the PW of each alternative using present worth analysis. In calculating present worth, let costs be positive$-$valued and

salvage value be negative$-$valued. Use the monthly service charge to calculate the amount paid annually.

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Option $ $1$:

Option

$2$:

Carry all interim calculations to $5$ decimal places and then round your final answers to $2$ decimal places. The tolerance is $+-0\mathrm{.}10.$

Which should be selected?