Question: Buchanon Industries i s evaluating a proposal t o install solar panels o n the roof o f its factory near Huntsville, Texas. The panels

Buchanon Industries is evaluating a proposal to install solar panels on the roof of its factory near Huntsville, Texas. The panels will cost $490 thousand per set. Depending on the price of electricity and the efficiency of the panels, the project will increase net operating cash flows by either $60 thousand per year or $190 thousand per year with a52% likelihood that the lesser outcome will occur. The useful life of the panels is4 years. If early results indicate savings of $190 thousand per year, 6 additional sets of panels will be installed next year at the same cost and with the same projected increase in net operating cash flows. What is the expected NPVof the project (in $ thousands, rounded to one decimal place, e.g.,12.3), including the option to expand, given a discount rate of9%?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!