Quote:
Originally Posted by pcovella
Suggest you read up on IRR. An 8% IRR means that all cash flows are discounted by 8% to result in a NPV of zero. In other words, If I were to calculate the NPV using 4%, the result would have been a positive number. Or in this case, If were to place the initial investment in an 8% tax free investment and take out $1750 per year, it would last 20 years. Maybe you are saying that my 8% return is 4% better than if I invested in an instrument that yielded 4%. You are correct. You are also correct that the potential investment value in the initial investment is not included in the payback calculation. I did not mention a payback period in my post. I'm not a fan of payback period when doing financial calculations. I prefer IRR.
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All I am saying is that the potential investment value of the initial cost of the system is very important, but it is almost never included in any financial calculations by those who promote solar systems. If I were to invest $20,000 at a rate of 4 percent for 20 years, I would have more than enough money to pay all of my electric bills for the 20 year period.