In this assignment, your group will conduct a comprehensive financial analysis of installing a solar energy system for a manufacturing plant. Your goal is to review and apply key concepts of engineering economics, including Net Present Value (NPV), Present Value (PV), Future Value (FV), and Net Present Worth. You will evaluate the investment’s potential by calculating these financial metrics over a 20-year period. Use the following information for your analysis:
• The manufacturing plant currently spends $100,000 annually on electricity.
• The proposed solar system will cost $500,000 to install and is expected to reduce the plant’s electricity costs by 70%.
• The system has a life expectancy of 20 years with negligible maintenance costs. Assume an annual discount rate of 5%
Tasks:
• Develop a basic cash flow statement for the program, outlining anticipated inflows (savings) and outflows (costs) over time.
• Utilize the cash flow statement to compute the net present value (NPV) for the upgrading program.
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