W11.1_SSD_Selection of Solar Photovoltaic System Based on Payback Period

1. Problem Definition

In this blog I am going to do find out the Payback Period for my PV installation, based on the data that I had used for my W4 Blog. With this Blog, I also would like to use this blog to claim for Problem Solving Work for Engineering Economic Chapter 5 Evaluating a Single Project.

The Payback Period Method calculates the number of year for the cash inflow to just equal to the cast out flow. The Simple Payback Period calculation, which ignores the time value of money, is based on the following formula:

                                    (1-1)

R_k = excess of revenue over expenditure in period k;

E_k = excess of expenditure over revenue in period k;

Ɵ = payback period

I = capital investment at k=0

For Discounted payback Period calculation, which considers the time value of money, the calculation is based on the following equation:

                                (1-2)

Ɵ’ = discounted payback period

i% = MARR