Answer:
The return on investment for purchasing a solar PV system that costs $10,000 and saves $2,000 per year for 20 years is about:
= 197.6%.
Explanation:
a) Data and Calculations:
Investment cost for the purchase of a solar PV system = $10,000
Annual savings = $2,000
Period of investment = 20 years
Assumed Discount rate = 3%
Present value of Costs:
Investment cost at year 1 = $10,000
Present value annuity factor at 3% for 20 years = 14.88
Present value of savings = $29,760 ($2,000 * 14.88)
Return on investment, in Present Value terms = $19,760 ($29,760 - $10,000)
Return on investment in percentage = Return on investment/Investment cost * 100
= $19,760/$10,000 * 100 = 197.6%