Question

You’re considering installing a solar panel on your home. You’ve been told it will save bid dollars in your electricity costs. How will you determine if the solar panels are a good deal?

Answer 1

For considering whether solar panel is a good deal or not we will find out the total savings during the life of solar panel. Let say the life of solar panel is 10 years and the savings that it will generate in electricity cost during this 10years should be greater then the cost of equipment. Further one can consider the present value factor to determine the savings. However the basic rule is that one will only invest if he gets more then what he gives. Installing a solar panel will save electric cost, one should determine how much savings? Is the savings is more then what I invest? If so he will invest, if not he will not invest.

Let say for example cost of solar panel is USD 100. Life 5years. Savings in electric cost must be atleast greater then USD 20 dollars, so that in 5years time it will save more then USD 100. Now if someone wants he can consider the return factor on the investment. Then he will determine cash flow using Present value technique and the PV of the inflow must be greater then cost of solar panel.