You are considering installing solar roof for your small business. The costs for materials and installation are estimated to be $28,000 up front. It will generate enough electricity to support your entire business for the next 25 years. Without the solar roof, your average monthly electricity bill is about $200.
a. Assume your annual cost of capital is 6%. What is the equivalent monthly cost for the solar roof? Does it make sense financially to install the solar roof? Why or why not?
b. If your cost of capital were 12%, would you change your mind? Why or why not?