Question: Josh is thinking about purchasing a $15,000 solar panel system to reduce the amount of electricity he purchases from the state. The system has an

Josh is thinking about purchasing a $15,000 solar panel system to reduce the amount of electricity he purchases from the state. The system has an area of 25 m2. The average solar flux at Josh's house is 200 W m-2(averaged over 24-hours and over an entire year). Josh pays $0.11per kW-h for electricity from the state grid. The solar panel system is 15% efficient. Assume that all these numbers are constant for the entire life of the system (i.e., we are modeling this in real terms). Further, assume that Josh will use all the electricity he creates. The solar panels will lower how much he needs to buy from the state grid. So, every 1 kW-h of solar energy will save him $0.11.

Assuming Josh will live in his house for 10 years, and using a real MARR of 7% per year compounded yearly, should he purchase the Panels? Assume that when he sells his house the system will have no value and no impact on the price of his home.

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