QUESTION 3

1. An analyst reports that installing solar panels would yield benefits of $10,000 per year for 30 years. The following chart calculates the Net Present Value of these benefits (including maintenance costs) under a variety of discount rates. The cost of the project is $130,000.

   r NPV

   .03 $200,000

   .06 $140,000

   .09 $90,000

   .12 $70,000

   A. Analyze the investment decision from the perspective of a profit maximizing firm

   B. Analyze the investment decision as a public project (ie taxpayers perspective).

   Be sure to provide quantitative rationale for your analyses