FINANCIAL ANALYSIS OF NU

SOLAR ADRESSED BY:

PRIYANKA PANDE YAHYA ZAK MAATOUK VIMARSH SAXENA

Group 4 (Sec 5)

Why we chose this topic? Wanted to do a project which would be eco-friendly and help

reduce the carbon footprints

Northeastern university uses a vast amount of non-renewable energy to power the entire campus

As of June 2011, according to College Sustainability Report.org the overall grade for Northeastern University is A-

The Implementation of a solar panel system at the University could be substantially beneficial

Brief idea of NU SOLAR Solar panel information: 50 KW capacity, Polycrystalline and

Monocrystalline Planning horizon: 25 years Capital Sources

Alternatives considered:

MARR: 6% (calculated using WACC)

Alternative 1 Alternative 2 Alternative 3 Alternative 4

Capital Source 1 + Vendor 1

Capital Source 2 + Vendor 2

Capital Source 3 + Vendor 3

Capital Source 4 + Vendor 4

Capital Source 1

Capital Source 2

Capital Source 3

Capital Source 4

Own Equity Government Funding

Bank Loan PPA with Vendor

AHP Analysis

Factors Economic Worth Vendor Reliability Panel Quality Panel Area

Economic Worth 1 3 3 3Vendor

Reliability 0.333333333 1 3 0.333333333

Panel Quality 0.333333333 0.333333333 1 1

Panel Area 0.333333333 3 1 1

Factor Economic Worth Vendor Reliability Panel Quality Panel Area Score Weight

Economic Worth 0.5 0.409090909 0.375 0.5625 0.461647727 46

Vendor Reliability 0.166666667 0.136363636 0.375 0.0625 0.185132576 19

Panel Quality 0.166666667 0.045454545 0.125 0.1875 0.131155303 13

Panel Area 0.166666667 0.409090909 0.125 0.1875 0.222064394 22

Alternative 1 Alternative 2 Alternative 3 Alternative 4Factor Weight Rating Score Rating Score Rating Score Rating Score

Economic Worth 46 9.34 429.90 10 460 1.41 64.83 1.199 55.18

Vendor Reliability 19 7 133 7 133 10 190 9 171

Panel Quality 13 8 104 8 104 9 117 10 130Panel Area 22 7 154 9 198 8 176 10 220

Total Score 820.90 895 547.83 576.18

Alternative 1 Alternative 2 Alternative 3 Alternative 4PW $28,730.21 $30,757.65 $4,334.77 $3,689.87

FW $123,306.36 $132,007.87 $18,604.26 $15,836.43

IRR 5.69% 9.55% 9.28% 7.12%

PBP 10.81 9.8 11.16 11.35

DPBP 18.34 15.44 18.21 20.03

Weighted Factor Method

Economic Analysis (BTCF)

Alternative 1 Alternative 2 Alternative 3 Alternative 40

5

10

15

20

25

0%1%2%3%4%5%6%7%8%9%10%

PAYBACK ANALYSIS

PBP DPBP IRR

Alternative 1 Alternative 2 Alternative 3 Alternative 4$0.00

$5,000.00$10,000.00$15,000.00$20,000.00$25,000.00$30,000.00$35,000.00

PRESENT WORTH

Conclusion (BTCF)

Best alternative is purchasing panel from Alternative 2 (Vendor 2 using Govt. funding)

Depreciation Methods MACRS-GDS and DDB are being considered for this project Solar Panel System are categorized as 5 year property by IRS under

MACRS-GDS DDB will depreciate the property over the planning horizon of 25

years Alternative 1 and Alternative 2 are being considered for after tax cash

flows.ATCF Variables Income Tax Rate (ITR) = 40% BTMARR = 6.00% After Tax MARR = Before Tax MARR * (1-ITR) ATMARR = 3.60%

Alternative 2 Alternative 1

ATCF (MACRS-GDS) ATCF (DDB) ATCF (MACRS-GDS) ATCF (DDB)

PW $50,314.20 $32,189.10 $44,630.61 $29,727.75

FW $121,810.43 $77,929.65 $108,050.49 $71,970.74

IRR 10.92% 6.54% 6.49% 5.15%

Economic Analysis (ATCF)

Economic Analysis (ATCF)

Alternative 2 Alternative 1$0.00

$20,000.00

$40,000.00 $60,000.00

$80,000.00 $100,000.00

$120,000.00

$140,000.00

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

$50,314.20 $44,630.61

$121,810.43 $108,050.49

10.92%

6.49%

After Tax Analysis (MACRS-GDS)

PW FW IRR

Alternative 2 Alternative 1$0.00

$10,000.00 $20,000.00 $30,000.00 $40,000.00 $50,000.00 $60,000.00 $70,000.00 $80,000.00 $90,000.00

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

$32,189.10 $29,727.75

$77,929.65$71,970.74

6.54%

5.15%

After Tax Analysis (DDB)

PW FW IRR

Economic Analysis (ATCF)

Present worth is Maximized when ATMARR=0%

Conclusion(ATCF)Alternative 2 is still the best after considering taxes into analysis

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

11.00%

12.00%

13.00%

14.00%

15.00%

($100,000.00)

($50,000.00)

$0.00

$50,000.00

$100,000.00

$150,000.00

Present Worth

Alternative 2 (MACRS-GDS) Alternative 1 (MACRS-GDS)

MARR

Val

ue in

Dol

lars

($)

Risk Analysis Fixed Inputs:

Panel Capacity (50000 watts)Panel Degradation Rate (0.50% per year)

Variable Inputs:Panel Installation Costs (Triangular Distribution)Usable Sunlight hours per year (Uniform Distribution)Electricity Rate (Triangular Distribution)Annual O&M Costs (Cumulative Distribution)MARR (Normal Distribution)

Outputs:Present Worth (PW)Internal Rate of Return (IRR)

Risk Analysis – PW Distribution

Risk Analysis – IRR Distribution

Advantages of NU SOLAR Increase in electricity rates in future results in more savings

Reliable and Predictable

Very low operating costs

Financing solutions for solar, with low or zero down payments

Only disadvantage is that it doesn’t work at night but battery storage to operate 24x7

THANK YOU!!