Question

Swifty Corporation has decided to invest in renewable energy sources to meet part of its energy needs for production. It is considering solar power versus wind power. After considering cost savings as well as incremental revenues from selling excess electricity into the power grid, it has determined the following.

		Solar		Wind
Present value of annual cash flows		$52,608		$129,765
Initial investment		$38,400		$105,500

Determine the net present value and profitability index of each project. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125 and profitability index answers to 2 decimal places, e.g. 15.25.)

		Solar		Wind
Net present value		$		$
Profitability index

Which energy source should it choose?

The company should choose windsolar energy source.

Answer 1

WIND Investment Required Present Value of Annula Cash Flows ( PVCF) Net present Value =PVCF-Investment Profitability index =PVCF/Investment Answers Solar 38400 52608 14208 1.37 105500 129765 24265 1.23 Net present Value =PVCF-Investment Profitability index =PVCF/Investment Which Source should it choose WIND Solar 14208 24265 1.37 (or) 0.37 1.23 (or) 0.23 WIND