Your town has a proposal to install solar panels on the roof of the combined City Hall - Police Station - Fire Station building. The offer is to install a 10kW system for $30,000 and it would be financed by the installing company for 10 years at 4% APR. It would deliver, on average, 100kW-hr per day of electricity. Electricity currently costs $0.08 per kW-hr and the city uses 6% as the discount rate for financial decisions.
Using Benefit-Cost analysis, should the city accept this proposal?
The installer then offers to install even more solar panels such that for an additional $10,000 you would get an additional 50kW-hr per day of electricity.
Using Benefit-Cost analysis, should the city accept this new proposal?