please don't do it by excel, do it manually and show work! 1. A manufacturing company decides...

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please don't do it by excel, do it manually and showwork!
1. A manufacturing company decides to buy solar cells inanticipation of rising electricity costs. The company is modelingits purchase to save it $20,000 for the first year, and this savingincreases 5% each year for the next 20 years as the solar cellsgenerate enough electricity to compensate for the rising powerbills. If the expected rate of return for the company equals 8%,what is the maximum amount of initial investment that makes this adesirable and profitable project? (assume the solar cells aremaintenance free for the next 20 years, but will be salvaged afterthat and company recovers no money from salvaging them)
2. If for the problem described above, thesolar cells supplier charges the purchasing company $200 annuallyas a service charge to do the maintenance and repair, should atechnical problem arise. What will be the maximum initialinvestment by the company to make the project profitable?

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3.7 Ratings (311 Votes)

1 The manufacturing company would save 2000 for the first year and then this saving would increase by 5 for next 20 years SO we will discount 20000 for first year and present value of See Answer

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please don't do it by excel, do it manually and showwork!1. A manufacturing company decides to buy solar cells inanticipation of rising electricity costs. The company is modelingits purchase to save it $20,000 for the first year, and this savingincreases 5% each year for the next 20 years as the solar cellsgenerate enough electricity to compensate for the rising powerbills. If the expected rate of return for the company equals 8%,what is the maximum amount of initial investment that makes this adesirable and profitable project? (assume the solar cells aremaintenance free for the next 20 years, but will be salvaged afterthat and company recovers no money from salvaging them)2. If for the problem described above, thesolar cells supplier charges the purchasing company $200 annuallyas a service charge to do the maintenance and repair, should atechnical problem arise. What will be the maximum initialinvestment by the company to make the project profitable?