Industries is evaluating whether to invest in solar panels to provide some of the electrical needs of its main office building in Buffalo , New YorkNew York.

Industries is evaluating whether to invest in solar panels to provide some of the electrical needs of its main office building in Buffalo , New YorkNew York.

The solar panel project would cost $600,000 and would provide cost savings in its utility bills of  $50,000

per year. It is anticipated that the solar panels would have a life of 2020 years and would have no residual value.

Requirement 1. Calculate the payback period in years of the solar panel project.

Determine the  formula, then calculate the payback period. ​(Round your answer to two decimal  places.)

	Initial investment	/	Expected annual net cash inflow	=	Payback period
	$600,000	/	$50,000	=	12.00	years

Requirement 2. If the company uses a discount rate of

1212 %,

what is the net present value of this  project? ​(Round your answer to the nearest whole dollar. Use parentheses or a minus sign for a negative net present  value.)

The net present value of the project is

$(226,550)

.

Requirement 3. If the company has a rule that no projects will be undertaken that have a payback period of more than five  years, would this investment be  accepted? If  not, what arguments could the energy manager make to try to obtain approval for the solar panel  project?

No

because the payback period is

more

than five years.

Select arguments the energy manager could make.

The payback period is not considering the cash inflows that occur after that period.

The payback method is only focusing on time, not on profitability.

Requirement 4. What would you do if you were in charge of approving capital investment  proposals? ​(If a box is not used in the  table, leave the box  empty; do not select a  label.)

Determine if the capital investment creates a positive net present value.

Ensure the funds are available for the purchase of the capital investment.