Knows you are taking engineering economics

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Reference no: EM131881028

A friend in Richmond wants to put solar panels on his house and knows you’re taking engineering economics and asks you for your advice. He says he received a price quote of $10,500 to install a 3kW solar system on his house. He’s excited and thinks he will be saving thousands of dollars per year. After a quick google search, you determine that Richmond is not ideal for solar and only averages 4.83 sun-hours per day; a 1kW-rated solar panel will produce an average 4.83 kilo-Watt-hours (kWh) of electricity per day. His electrical rate is 9.00 cents per kWh, so every kWh produced by his solar panels will save him 9 cents in electrical bills. You also know solar panels degrade about 0.5% each year, and electrical rates will probably increase about 2% each year. If this solar panel system is estimated to last 15 years, what is his rate of return? Show your work in Excel. Considering this is money he would otherwise be investing in his 401k which has averaged about 7% annually, what recommendation do you make to your friend?

Reference no: EM131881028

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