A small house owner is considering investing in solar cells on the roof at a...
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A small house owner is considering investing in solar cells on the roof at a cost of SEK 140,000. If he does so, he will receive a grant from the state in the form of a conversion grant to Green Electricity of SEK 40,000. The solar cells will reduce the electricity cost by SEK 10,000 per year for all eternity (forever).
Calculate and comment on the investment using the investment methods below.
- Net present value at a discount rate of 7%.
- Internal rate of return (IRR) and compare the IRR with the above discount rate in the decision situation.
- Repayment period (for profitable investment, the period may not be more than 9 years)
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