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How soon will seattle be paid back on the project

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Reference no: EM133009641

Seattle is evaluating whether to add solar panels to all its school buildings throughout the city as away to reduce energy cost. The cost of this capital program would be $15 million per year for 5 years (i.e., $15 million in year 0, $15 million in year 1, etc.).

It is expected that energy cost savings would be the following:

Year 1: $3 million
Year 2: $6 million
Year 3: $9 million
Years 4-10: $12 million per year

Problem 1: Seattle's discount rate in evaluating projects is 4% and the useful life of the full project is 10 years (i.e., your analysis should end at year 10). What is the internal rate of return of this project? How soon will Seattle be paid back on this project? Should Seattle undertake the project? Provide a recommendation and numerical justification for your recommendation.

Reference no: EM133009641

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