Question: Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of

Two methods can be used for producing solar panels for electric power generation. Method 1 will have an initial cost of $550,000, an AOC of $160,000 per year, and $125,000 salvage value after its 3-year life. Method 2 will cost $830,000 with an AOC of $120,000 per year, and a $240,000 salvage value after its 5-year life. Assume your boss asked you to determine which method is better, but she wants the analysis done over a 3-year planning period. You estimate the salvage value of method 2 will be 35% higher after 3 years than it is after 5 years. If the MARR is 10% APR, compounded daily, which method should the company select? If required, be sure you use your MARR to 3 decimal places. (Example for 10% use 10.000%) Use the above information to answer the following:

a. What is the study period, T? 3

b. What is the PW of Method 1? (Nearest whole dollar) (it is not about -854,000 +/- 2%)

c. What is the PW of Method 2? (Nearest whole dollar) (it is about -885,000)

Excel can be used for calculations as long as the formulas are shown.

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