Question

O pts Question 2 If a solar panel system has an increasing annual maintenance cost (an arithmetic gradient) of $500 per year over an 8 year period THAT STARTS AT YEAR 4, then what is the present value based on 10% interest? To be clear: the total period is 12 years with an 8 year gradient starting in year 4. O pts Question 3 If we add an $800 uniform annual payment to the solar panel system of problem #2 (for all 12 years), what is the new total present value? To be clear: this answer depends on a correct answer to problem #2 (where you moved a gradient), which depends on a correct answer to problem #1 (where you calculated a gradient).

Answer 1

Q1 ) Using financial calculator to calculate present value

Inputs : pmt =500

N = 8

I/y = 10%

Fv = 0

Pv = compute

We get , Present Value = $ 2,667.46

Q2 ) Present value of cost at year 4 = 2,667.46 ( as in part 1)

Present value at 0 = 2667.46 / (1+r ) ^4

= 2,667.46 / (1.10)^4

= 2,667.46 / 1.4641

= $1,821.91

Q3) Given :

Uniform Payment of 800 is added for every year

Payment for year 1 to 4 = 800

Payment for year 5 to 12 = 800 + 500 = 1,300

I = 10%

Using financial calculator to calculate present value

Using Npv method to calculate present value

Inputs : C0 = 0

C1 = 800 frequency = 4

C2 = 1,300. Frequency = 8

I = 10%

Npv = compute

We get, Present value = $ 7,272.87