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LEGRAND

Legrand is considering an energy efficiency project that would: 1) Help the company limit carbon emissions and earn revenue from carbon credits if cap and trade regulations are implemented. 2) Have an internal rate of return of 14% over 5 years, higher than the discount rate, making it a viable investment. 3) Avoid $7.78 per ton of carbon with the energy savings. 4) May not be worthwhile if government incentives are withdrawn, as the IRR would fall below 10% and the payback period would exceed 5 years.

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Sachin Gupta
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488 views1 page

LEGRAND

Legrand is considering an energy efficiency project that would: 1) Help the company limit carbon emissions and earn revenue from carbon credits if cap and trade regulations are implemented. 2) Have an internal rate of return of 14% over 5 years, higher than the discount rate, making it a viable investment. 3) Avoid $7.78 per ton of carbon with the energy savings. 4) May not be worthwhile if government incentives are withdrawn, as the IRR would fall below 10% and the payback period would exceed 5 years.

Uploaded by

Sachin Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

1.

What are the appropriate incentives for Legrand to undertake an


energy efficiency project?
a. Future Regulations : If Cap and Trade regulation is passed, it will be
imperative on organization
to limit their carbon emission Also It can increase the incoming cash flow by
selling the carbon credit to other organization , reducing payback period also
short and long term saving.
b. IRR for 5 years is 14% which is more than discount rate.
2. What is the payback period/IRR for Legrand?
Payback Period: 4 Years
Years
5 year
7 year
10 year
20 year

IRR (no residual


value)
14%
27%
29%
30%

3. What was the price per ton of carbon avoided with energy savings?
Avoided Cost per ton of carbon: $7.78
4. What reasons could be offered for not pursuing this project?
a. If the Duke Energy withdraws incentives i.e. Smart Saver Incentive Program is
stopped. IRR for 5 years is 3% which is less than discount rate (10%). If Legrand is
looking to recover its investment in 5 years then it should not go for this project.
b. If government federal incentives are withdrawn i.e. not extended. IRR for 5 years
is 7% which is less than discount rate (10%). If Legrand is looking to recover its
investment in 5 years then it should not go for this project.
c. If both above incentives are withdrawn, IRR for 5 years is -1, which is less than
discount rate (10%).
%). If Legrand is looking to recover its investment in 5 years then it should not go
for this project.

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