owadays it is very important to reduce one's carbon "footprint" (how much carbon we produce in our daily lifestyles). Minimizing the use of fossil fuels and instead resorting to renewable sources of energy (e.g., solar energy) are vital to a "sustainable" lifestyle and a lower carbon footprint. Let's consider solar panels that prewarm the water fed to a conventional home water heater. The solar panels have an installed cost of $2,200, and they reduce the homeowner's energy bill by $315 per year. The residual value of the solar panels is $418 at the end of their 12-year life. What is the annual IRR of this investment? Use the trial-and-error method starting with an initial guess of 12% The annual IRR of this investment is. ( round two decimal places)

owadays it is very important to reduce one's carbon "footprint" (how much carbon we produce in our daily lifestyles). Minimizing the use of fossil fuels and instead resorting to renewable sources of energy (e.g., solar energy) are vital to a "sustainable" lifestyle and a lower carbon footprint. Let's consider solar panels that prewarm the water fed to a conventional home water heater. The solar panels have an installed cost of $2,200, and they reduce the homeowner's energy bill by $315 per year. The residual value of the solar panels is $418 at the end of their 12-year life. What is the annual IRR of this investment? Use the trial-and-error method starting with an initial guess of 12% The annual IRR of this investment is. ( round two decimal places)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 5PA: Kylies Cookies is considering the purchase of a larger oven that will cost $2,200 and will increase...

See similar textbooks

Similar questions

IKEA is considering converting its all Australian stores into eco stores by installing solar system. The goal is to generate its own electricity with excess electricity to be sold to Origin Energy. The quotation received from various solar companies showed that in the initial phase, the generated electricity would be just enough to meet the demands of stores with no excess capacity. The system will improve the carbon foot printing of the company and will reduce the cost of Carbon trading under Carbon emission trading scheme which is done every two years. The operating characteristics are as follows: Initial outlay for new equipment 20-year life no residual value$ 1887,645Annual operating cost over 20-year life$ 67, 994Depreciation 10% p.a.Savings in electricity due to own generation $ 995, 987Total cost of cleaning and maintaining the system every 5 years $ 8900 Calculate summary of the total cost of solar system for next 20 years Should IKEA invest in this new system…
Suppose you are a regulator considering applying a technology standard to automobile manufacturers. This standard would require a 10 million dollar investment by the manufacturers, but each year it would reduce total carbon emissions by 10,000 tons. Using a social cost of carbon of $75, a 3% discount rate, and considering only the next twenty years, what is the NPV of applying this standard? (Assume the investment is made immediately and then benefits of carbon emissions are received at the end of year1, 2, ... and year 20. Round to the nearest whole number.)
Carbon taxes are applied to the producers of carbon emissions such as the oil and gas companies that extract the fossil fuels from the earth, but those taxes get passed on to the consumer. How much do consumers end up paying for energy when it comes to the carbon tax? a. they end up paying a small percentage of the carbon tax regardless of the energy source b. they end up paying an amount greater than the carbon tax so that the company profits c. they end up paying an amount proportional to the amount of the greenhouse gases released d. they end up switching to reusable sources and paying no carbon tax at all
Individual industries will use energy as efficiently as it is economical to do so, and there are several incentives to improve the efficiency of energyconsumption. To illustrate, consider the selection of a new water pump. The pump is to operate 800 hours per year. Pump A costs $2,000, has an overall efficiency of 82.06%, and it delivers 11 hp. The other available alternative, pump B, costs $1,000, has an overall efficiency of 45.13%, and delivers 12.1 hp. Both pumps have a useful life of five years and will be sold at that time. (Remember 1 hp = 0.746 kW.) Pump A will use SL depreciation over five years with an estimated SV of zero. Pump B will use the MACRSdepreciation method with a class life of three years. After five years, pump A has an actual market value of $400, and pump B has an actual market value of $200. Using the IRR method on the after-tax cash flows and a before-tax MARR of 16.67%, is the incremental investment in pump A economically justifiable? The effective income…
Classify the following environmental activities as prevention costs, detection costs, internal failure costs, or external failure costs. For external failure costs, classify the costs as societal or private. Also, label those activities that are compatible with sustainable development (SD). 1. A company takes actions to reduce the amount of material in its packages. 2. After the activated carbons useful life, a soft-drink producer returns this material used for purifying water for its beverages to the supplier. The supplier reactivates the carbon for a second use in nonfood applications. As a consequence, many tons of material are prevented from entering landfills. 3. An evaporator system is installed to treat wastewater and collect usable solids for other uses. 4. The inks used to print snack packages (for chips) contain heavy metals. 5. Processes are inspected to ensure compliance with environmental standards. 6. Delivery boxes are used five times and then recycled. This prevents 112 million pounds of cardboard from entering landfills and saves 2 million trees per year. 7. Scrubber equipment is installed to ensure that air emissions are less than the level permitted by law. 8. Local residents are incurring medical costs from illnesses caused by air pollution from automobile exhaust pollution. 9. As part of implementing an environmental perspective for the Balanced Scorecard, environmental performance measures are developed. 10. Because of liquid and solid residues being discharged into a local lake, the lake is no longer fit for swimming, fishing, and other recreational activities. 11. To reduce energy consumption, magnetic ballasts are replaced with electronic ballasts, and more efficient light bulbs and lighting sensors are installed. As a result, 2.3 million kilowatt-hours of electricity are saved per year. 12. Due to a legal settlement, a chemicals company must spend 20,000,000 to clean up contaminated soil. 13. A soft-drink company uses the following practice: In all bottling plants, packages damaged during filling are collected and recycled (glass, plastic, and aluminum). 14. Products are inspected to ensure that the gaseous emissions produced during operation follow legal and company guidelines. 15. Operating pollution control equipment incurs costs. 16. An internal audit is conducted to verify that environmental policies are being followed.
You are keen on the use of solar power and have decided to evaluate investing in a solar system for your home. After consulting with several solar contractors, you have learned that the installed cost of solar systems is about $2.55 per kilowatt hour (kWh) of rated production and best practice is to install a solar system equal in capacity to your annual electric consumption. You consume 11,000 kWh a year at a current cost of $0.11 per kWh and future costs per kWh are expected to increase 1.51% per year. For the first year of operation, you will receive a tax rebate equal to 22%of the installed cost of the solar system and your marginal tax rate is 22%.Finally, because solar systems have an indefinite life expectancy, you expect to save the cost of electricity for perpetuity. Use the information you have gathered to determine the following: a. The initial cash flow. b. The periodic cash flow for the first ten years. c. Terminal cash flow for year ten using a discount rate…
Kim Inc. must install a new air-conditioning unit in its main plant. Kim must install one or the other of the units; otherwise, the highly profitable plant would have to shut down. Two units are available, HCC and LCC (for high and low capital costs, respectively). HCC has a high capital cost but relatively low operating costs, while LCC has a low capital cost but higher operating costs because it uses more electricity. The costs of the units are shown here. Kim's WACC is 7.5%. 0 1 2 3 4 5 HCC -$600,000 -$45,000 -$45,000 -$45,000 -$45,000 -$45,000 LCC -$110,000 -$180,000 -$180,000 -$180,000 -$180,000 -$180,000 Which unit would you recommend? Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since LCC's NPV of costs is lower than HCC's, LCC would be chosen. Since we are examining costs, the unit chosen would be the one that had the lower NPV of costs. Since HCC's NPV of costs is lower than LCC's, HCC would be chosen.…
CleanTech manufactures equipment to mitigate the environmental effects of waste. (a) If Product A has fixed expenses of $15,000 per year and each unit of product has a $0.20 variable cost, and Product B has fixed expenses of $5000 per year and a $0.50 variable cost, at what number of units of annual production will A have the same overall cost as B? (b) As a manager at CleanTech what other data would you need to evaluate these two products?
Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required:1. Assuming the cost of capital is 12%, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate…
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company’s operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initialadded cost Variable cost Variable savings Recycle and reuse production material $5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $1,000 per year $33,000 per year Replace assembly room light fixtures with natural light 120,000 $180 per month $220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Determine if it is viable to recycle and use…
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company's operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initial Added Cost Variable Cost Variable Savings Recycle and reuse production materials $ 5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $ 1,000 per year $ 33,000 per year Replace assembly room light fixtures with natural light 120,000 $ 180 per month $ 220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Identify which CSR activities Green Manufacturing should…
Green Manufacturing is a traditional manufacturing company located in the midwestern United States. The company's operations manager is developing a strategy to become more CSR-oriented. In an effort to evaluate possible areas where CSR initiatives can be implemented, the manager has gathered the following data regarding three potential CSR activities: Initial Added Cost Variable Cost Variable Savings Recycle and reuse production materials $ 5,000 $0.10 per lb. of recycled material $0.15 per lb. of recycled material Add solar panels as a source of power 700,000 $ 1,000 per year $ 33,000 per year Replace assembly room light fixtures with natural light 120,000 $ 180 per month $ 220 per month The recycling activity would carry on indefinitely. The solar panels would have a useful life of 30 years. The replacement of assembly room light fixtures with natural light is assumed to have an 80-year effect. a. Identify which CSR activities Green Manufacturing should…