Produce and sell electricity to the local electric utility

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Q. In 2020, Ahmed decides to invest in a wind turbine that would produce and sell electricity to the local electric utility. He decides to buy a smaller, used turbine. It will cost $1841 to purchase the turbine this year, and another $582 in parts and labor will be needed this year to get this ready for service. After 5 years of use (and during year 2026), he estimates that it will cost $748 to rebuild the turbine and there will be no revenue from production that year. Ahmed estimates that the net cash flows (after depreciation and taxes) will be $559 each year in years 2021, 2022, 2023, 2024, 2025 and $687 each year in years 2027, 2028, 2029, and 2030. The turbine will be taken out of service at the end of year 2030 and there will be no salvage value. The Minimum Acceptable Rate of Return (MARR) (the interest rate) is 8 percent per year, compounded annually. What is the Benefit/Cost ratio of this turbinein year 2020)? (Express your answer to two decimal places of accuracy.) Benefit/Cost ratio = ?

Reference no: EM136323

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