Economics Homework Help

You will need to submit an excel sheet in addition to written answers

The government of Nova scotia has been providing rebates for household to install home solar panel’s.

https://www.efficiencyns.ca/residential/programs-services/solar-homes/

Mr. Bourgeois is considering installing solar panels on his roof but is unsure if it is worth it. Can you help him? You can? Great!

Some information about Mr. Bourgeois’ home:

• Current home consumption of electricity cost $1200 this year, and forceable consumption for the next 25 years.

• Estimated yearly price increase of electricity: 1.2% (regulated by the NS government)

• Estimated total return on emera shares is approximately 10% a year (share increase and dividend payment)

Your tasked to calculate the present value of two options:

Option 1: disburse $10,000 (original cost is 14,000, with 4,000 rebate) for a complete install of solar panels which would save the home owner $900 a year, for the next 25 years.

Option 2: keep paying for electricity, not install solar and purchase $10,000 worth of Emera shares.

Question:

1. Which option is better for Mr. Bourgeois and his family? Why (show all your work)
2. What type of refund should the province provide if they were serious about making people switch to solar? (giving away the answer of the above question, but show your work!)
3. If you could only (or was only willing to risk) you investment in Canadian Bonds that pay 2.3% instead of emera shares, would you want to get solar pannels? Explain why or why not.
4. While risk is inherant: would you rather take risk that your solar panels will break or that the stock will drop in 25 years? To whom would this current nova scotia rebate be targeted at?