Sally wants to install solar panels on the roof of her home; an 11-panel system should...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sally wants to install solar panels on the roof of her home; an 11-panel system should generate 3,250 kWh of electricity each year of operation. Sally currently uses an average of 600 kWh per month of electricity and assume, for simplicity, that her use of electricity will remain constant over the next 20 years. Sally's electric utility company currently charges $0.14 per kWh (regardless of how much electricity is used each month), but will raise its electricity rates by 5% per year for the next 20 years. The solar company that Sally is working with gives customers 2 options to pay for their solar panels: Option 1, full prepay (FPP), requires customers to pay the full cost of installation ($7,378) up front but make no monthly payments. Option 2, partial prepay (PPP), requires customers to initially pay part of the cost of installation ($4,916) and make payments of $26/month for the next 20 years. Develop a spreadsheet model to help Sally choose between these two payment options. In addition to finding the cumulative 20-year savings of installing solar panels over not installing them, calculate the net present value of the annual savings over 20 years (including the cost in year 0). Over 20 years, your model should track the following quantities: A) Year; B) Annual electric bill with no solar panels; C) Annual electric bill with solar panels; D) Annual Savings with FPP option; E) Annual Savings with PPP option; F) Cumulative savings with FPP option; and G) Cumulative savings with PPP option. Start your model in year 0, with the upfront costs of each payment plan shown as a negative number; every year after should show the savings from installing solar panels as a positive number, e.g., Year 0 3 Annual Electric Bill No Solar With Solar $1,008 $1,058 $553 $581 : Annual Savings FPP -$7,378 $455 $478 : PPP -$4,916 $143 $166 : Cumulative Savings FPP PPP -$7,378 -$4,916 -$6,923 -$4,773 -$6,445 -$4,607 : : To Do: 0. Name your Excel file "A2-LastnameFirstname" and submit on iLearn by the due date. 1. Sheet 1: Build a model that follows the format used in lectures, e.g., use range names and appropriate cell styles for inputs, calculated quantities, and outputs. Then: a. Make a 1-way data table where the annual growth rate in utility electricity prices varies from 2% to 7% in 1% increments, and the outputs are the cumulative 20-year savings and the NPV of both FPP and PPP. Use a 4% interest rate in the NPV calculation. b. Make a 2-way data table for the cumulative 20-year savings for the PPP option, where the growth rate in utility electricity price varies from 2% to 7% in 1% increments, and the lease cost per month varies from $20 to $35 in $3 increments. 2. Sheet 2: Make a line chart of cumulative savings (in columns F & G) from both payment options by year. 3. Sheet 3: Give brief answers to the following questions. a. Which payment option appears to be the better one for Sally, and (briefly) why? Sally wants to install solar panels on the roof of her home; an 11-panel system should generate 3,250 kWh of electricity each year of operation. Sally currently uses an average of 600 kWh per month of electricity and assume, for simplicity, that her use of electricity will remain constant over the next 20 years. Sally's electric utility company currently charges $0.14 per kWh (regardless of how much electricity is used each month), but will raise its electricity rates by 5% per year for the next 20 years. The solar company that Sally is working with gives customers 2 options to pay for their solar panels: Option 1, full prepay (FPP), requires customers to pay the full cost of installation ($7,378) up front but make no monthly payments. Option 2, partial prepay (PPP), requires customers to initially pay part of the cost of installation ($4,916) and make payments of $26/month for the next 20 years. Develop a spreadsheet model to help Sally choose between these two payment options. In addition to finding the cumulative 20-year savings of installing solar panels over not installing them, calculate the net present value of the annual savings over 20 years (including the cost in year 0). Over 20 years, your model should track the following quantities: A) Year; B) Annual electric bill with no solar panels; C) Annual electric bill with solar panels; D) Annual Savings with FPP option; E) Annual Savings with PPP option; F) Cumulative savings with FPP option; and G) Cumulative savings with PPP option. Start your model in year 0, with the upfront costs of each payment plan shown as a negative number; every year after should show the savings from installing solar panels as a positive number, e.g., Year 0 3 Annual Electric Bill No Solar With Solar $1,008 $1,058 $553 $581 : Annual Savings FPP -$7,378 $455 $478 : PPP -$4,916 $143 $166 : Cumulative Savings FPP PPP -$7,378 -$4,916 -$6,923 -$4,773 -$6,445 -$4,607 : : To Do: 0. Name your Excel file "A2-LastnameFirstname" and submit on iLearn by the due date. 1. Sheet 1: Build a model that follows the format used in lectures, e.g., use range names and appropriate cell styles for inputs, calculated quantities, and outputs. Then: a. Make a 1-way data table where the annual growth rate in utility electricity prices varies from 2% to 7% in 1% increments, and the outputs are the cumulative 20-year savings and the NPV of both FPP and PPP. Use a 4% interest rate in the NPV calculation. b. Make a 2-way data table for the cumulative 20-year savings for the PPP option, where the growth rate in utility electricity price varies from 2% to 7% in 1% increments, and the lease cost per month varies from $20 to $35 in $3 increments. 2. Sheet 2: Make a line chart of cumulative savings (in columns F & G) from both payment options by year. 3. Sheet 3: Give brief answers to the following questions. a. Which payment option appears to be the better one for Sally, and (briefly) why?
Expert Answer:
Answer rating: 100% (QA)
To help Sally choose between the two payment options for installing solar panels we can develop a spreadsheet model that calculates the cumulative savings over 20 years and the net present value NPV o... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I
Posted Date:
Students also viewed these accounting questions
-
The solar panels on the roof of a house measure 4.0 m by 6.0 m. Assume they convert 12% of the incident EM wave's energy to electric energy. (a) What average power do the panels supply when the...
-
A university spent $1.8 million to install solar panels atop a parking garage. These panels will have a capacity of 500 kw, have a life expectancy of 20 years and suppose the discount rate is 10%. a....
-
How much firewood is used for household heating where you live? For cooking? Is it a necessity?
-
Displacement vector A(vector) points due east and has a magnitude of 2.00 km. Displacement vector B(vector) points due north and has a magnitude of 3.75 km. Displacement vector C(vector) points due...
-
Lin Lowe plans to deposit $1,800 at the end of every 6 months for the next 15 years at 8% interest compounded semiannually. What is the value of Lins annuity at the end of 15 years?
-
For a recent year, the balance sheet for The Camp bell Soup Company includes accrued expenses of $553 million. The income before taxes for Campbell for the year was $1,073million. a. Assume the...
-
Wendy Craven is the sole shareholder of a property management company near the campus of Pensacola Junior College. The business has cash of \($6,000\) and furniture that cost \($12,000\) and has a...
-
In the thermos shown in Figure, the innermost compartment is separated from the middle container by a vacuum. There is a final shell around the thermos. This final shell is separated from the middle...
-
As a Finance Manager, describe how learning Macroeconomics can equip you in your business undertakings? Cite some examples. You are a Finance Manager working for a meat processing/manufacturing...
-
The Golden Oranges Nursery, which provides facilities for pre-school children on a commercial basis, is preparing its cash budget for next year. A profile of the estimated revenues and expenses for...
-
Before a manager can consider the right innovations to pursue, they must understand what the organization is best at and its strategic direction. discuss the importance of knowing the core...
-
Develope an essay on this question: How is the concept of resilience developed in novel and two other texts from the course? I have chosen Medicine Walk, Oedipus Rex and I Found The House My...
-
Christmas Anytime Issues $700,000 of 5% bonds, due in 15 years, with Interest payable semiannually on June 30 and December 31 each year. Calculate the issue price of a bond and complete the first...
-
6) A 50-kg sofa up a moving ramp at constant speed. The ramp makes an angle of 10 with the horizontal. The coefficient of kinetic friction between the sofa and the ramp is 0.3. Determine the force...
-
A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an...
-
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment Beta A $204,000 1.50 B 306,000 0.60...
-
A spacecraft flying away from earth at a speed of 0 . 9 5 c shines a communications laser back towards earth. a ) How fast does an observeron earth measure the laser light to be travelling? b )...
-
Difference between truncate & delete
-
When several capital assets are purchased for a single lump- sum consideration, cost apportionment is usually employed. Explain how you would determine the allocation to different categories. Why is...
-
On 1 July 20X4, Theriout Corporation acquired a manufacturing plant in Cape Breton for $ 1,750,000. The plant, employing 50 workers, began operation immediately and is expected to be in operation for...
-
The August bank reconciliation for C& C Limited: Balance per bank..................... $ 151,570 Plus: outstanding deposits 17,900 Less: Outstanding cheques ($ 11,245, $ 650, $ 1,570, $ 890, $ 120).....
-
Mark Miller started his own delivery service, Miller Deliveries, on June 1,2008. The following transactions occurred during the month of June. Instructions (a) Show the effects of the previous...
-
Laura Geller started her own consulting firm, Geller Consulting, on May 1, 2008. The following transactions occurred during the month of May. Instructions (a) Show the effects of the previous...
-
On June 1, Michelle Bullock started Divine Cosmetics Co., a company that provides individual skin care treatment, by investing \($26,200\) cash in the business. Following are the assets and...
Study smarter with the SolutionInn App