Answer to Question #244929 in Civil and Environmental Engineering for Alan Enrico V Tuib

Question

A new solar-cell unit is to be installed in an office complex at an initial cost of $200,000. It is expected
that the system will generate annual cost savings of $25,000 on the electricity bill. The solar cell unit
will need to be overhauled every 5 years at a cost of $7,000 per overhaul. If the annual interest rate is
12%, find the discounted payback period for the solar-cell unit considering the time value of money.
The costs of overhaul are to be considered in calculating the discounted payback period.

Answer 1

T= (($25,000+$35,000)/$200,000)^.12

T= 0.86years.