Recalculate NPV in Example 3-3 using the following adjustments to reflect government support programs for the project:

1. A rebate of $200/rated kW, if the system is rated at 5000 kW.

2. An operating credit of $0.025/kWh, if the system produces on average 1.8 million kWh/year.

3. An interest rate buydown such that the MARR for the project is reduced to 3%.

Question

Recalculate NPV in Example 3-3 using the following adjustments to reflect government support programs for the project:

1. A rebate of $200/rated kW, if the system is rated at 5000 kW.

2. An operating credit of $0.025/kWh, if the system produces on average 1.8 million kWh/year.

3. An interest rate buydown such that the MARR for the project is reduced to 3%.

Accepted Answer

1. The rebate is worth $200/kW × 5000 kW = $1 million. Therefore, the net capital cost of the project is now $5.5 million, and the NPV of the project is now $432,881, so it is viable.

2. The annual operating credit is worth $0.025/kWh × 1.8 × 10[latex]^6 [/latex] kWh = 45,000 EU/year. The annuity is therefore increased to $445,000/year.

Recalculating the present worth of the annuity gives $6.27 million, and the NPV of the project is now $67,108, so it is marginally viable.

3. With the reduced MARR, we recalculate the conversion factor for the annuity of (P/A, 3%, 25) = 17.41. The present worth of the annuity is now $6.97 million, and the NPV of the project is now $942,865, so it is viable.

Question 3.6: Recalculate NPV in Example 3-3 using the following adjustmen...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions