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Alvarez Manufacturing is looking at starting a CSR program. Their first idea is to install solar panels on the roof to reduce their carbon footprint as well as perhaps save some money on utility costs. They have generated the following information regarding the decision:

Initial Cost of Decision: $1,000,000

Estimated Savings Per Year 125,000

Estimated Annual Cost of Program 5,000

Life of Solar Panels 10 years

Interest Rate 5.00%

Required

1. Calculate the annual savings per year.
2. Calculate the total savings over the life of the plan.
3. Calculate the total net savings over the life of the plan (including the initial cost).
4. Based on your calculations, should Martinez go ahead with the program? Explain your answer.

Questions	Answers
Annual Savings Per Year
Total Savings Over Life of Plan
Total Net Savings Over Life of Plan

Should Martinez start the plan? Explain your answer with numbers.

Part 2

After reviewing your answer to part 1, Mrs. Martinez was reminded of the time value of money. She would like to see the net present value for this project.

Required

1. Calculate the net present value for this project.
2. Should Martinez start the project? Explain your answer using numbers.
3. Should the NPV matter in deciding on the viability of the project? What kind of answer would get you to change your answer to the above conclusion?

Net Present Value (after investment)

Should Martinez start the project? Explain your answer with numbers.

Should the NPV matter in this decision? In starting a CSR program, does every project have to be profitable? How much of a loss (if any) should Martinez be willing to absorb to start this project?

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