1.png

1.png - Consider the cost of a solar panel system that is...

  • No School
  • AA 1
  • 1
  • 100% (1) 1 out of 1 people found this document helpful

This preview shows page 1 out of 1 page.

Unformatted text preview: Consider the cost of a solar panel system that is intended to replace 75 percent of a home’s electricity use." A system that would fit on the roof of a typical home and would reduce electricity usage by 25 percent costs $37,496.36 before any government tax incentives. Currently, the US. government provides a 30 percent tax credit in the year of the solar panel wquisition, and the system is exempt from state and local property taxes." The average monthly electrical hill is $200 per month. The cost of borrowing for a solar panel system through the FHA’s Energy Eflicient Mortgage (EEM) program, available for energy efficient home improvements, is an APR of 3.35%." The amount of the mortgage is the cost of the panel system, less any federal incentive. The interest on the EEM is tax deductible, but electricity costs are not deductible for the individual homeowner. Assume that the homeowner has a marginal tax rate of38 percent and that the installation is at the end of the current year, but the panels are not used until the first month of the coming year. Further, assume that the solar panels have a useful life of 30 years and that at the end of the life of the panels the homeowner must pay a $500 for removal and disposal of the panels at the local dump. Requirements A. What is the payback period for a solar panel system? B. What is the added value of investing in solar panels on a net present value basis? C. If energy costs were to increase at a rate of 0.25 percent each month, would this affect the attractiveness of the panels? If so, why? D. What is the minimum percent tax credit necessary to make the solar system attractive to homeowners on a net present value basis, assuming that energy costs do not escalate? ...
View Full Document

  • Fall '19
  • cost of a solar panel system

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern