The return on investment for purchasing a solar PV system that costs $10,000 and saves $2,000 per year for 20 years is about:

The return on investment for purchasing a solar PV system that costs $10,000 and saves $2,000 per year for 20 years is about:

= 197.6%.

Explanation:

a) Data and Calculations:

Investment cost for the purchase of a solar PV system = $10,000

 Annual savings = $2,000

Period of investment = 20 years

Assumed Discount rate = 3%  

Present value of Costs:

Investment cost at year 1 =         $10,000

 Present value annuity factor at 3% for 20 years = 14.88

Present value of savings = $29,760 ($2,000 * 14.88)

Return on investment, in Present Value terms = $19,760 ($29,760 - $10,000)

Return on investment in percentage = Return on investment/Investment cost * 100

= $19,760/$10,000 * 100 = 197.6%

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