Date:

Name:

Student No: 404

Test Paper OCPM1DQA05

Always attach calculation excel worksheet

Investment ROI, IRR:

Question 0541:

What is an investment and why one should make them?

Investment is an action or intention to hold something such that the value of such something is
expected to increase. It is a monetary asset purchased with the idea that the asset will provide income
in the future or will later be sold at a higher price for a profit.

Question 0542:

What can be different type of investments and how much rate of return per annum can be expected out
of each of them? Give at least five examples.

Investment in time, talent, skill, any material or non-material subject, rights, patent, exclusive invention
and innovation. Rate of return per annum depends on experience and scientific formulae used for it.

Time- If one person invests more time than the other partner 1 st person should receive more profit.

Talent- The talented person should receive highest share. It depends on agreement made.

Skill- skilled person should receive highest share than unskilled person

Material- person who supplies more material at the time of investment should receive highest share.

Patent- if aperson holds a patent then he should be given max amount at return of the investment.

Question 0543:

How do you calculate rate of return? Give examples.

If in a year he receives 200 for 1000 investment, then rate of return is 200/1000 which is 0.2 = 20% per
annum

Question 0544:

How do you define payback period? In case of an investment of Rs.1,00,000/-, the average return per
year is Rs.15,000/-, what is the payback period?
Pay back period is investment/ avg returns per year which is 100000/15000 = 6.66 years = 80 months

Question 0545:

How do you define internal rate of return? What is the internal rate of return when investment is
Rs.1,00,000/- and average income is Rs.15,000/- every year?

Internal rate of return is the interest rate at which the net present value of all the cash flows both
positive and negative from the investment is equal to zero. IRR is 0.15

Question 0546:

Give a comparative study of investment of Rs.10,00,000/- in solar power plant as compared to

investment in fixed deposit.

For an investment of 10lakh based on unit price in the place the amount gets recovered in some time
and after that everything is profit. If there is a damage to the system or any we may get loss.In fixed
deposit the interest rate is less and the investment is always safe. Other than investement every month
we receive interest rate and deposit amount can be withdrawn any time.

Question 0547:

Calculate the payback period, rate of return and internal rate of return for Investment in Solar Power
Plant of Rs.10,80,000/-, average generation per year 30,000 units, grid rate per unit Rs.12/-

Total rate return in 1year- 12*30,000=3,60,000

Payback period – 10,80,000/3,60,000=3 years

Rate of return= 33.33% per year

Internal rate of return = 33.33

Question 0548:

Calculate solar rate per unit. Investment Rs.10,00,000/- average generation per year is 30,000 units,
average O&M Charges per year Rs.20,000/-, plant life 25 years.

Solar rate per unit* no of units per year*total years=10,00,000+20,000*25

Solar rate per unit=15,00,000/7,50,000=2 rs per unit

Question 0549:

Calculate savings for 10 years. Investment Rs.10,00,000/- average generation per year is 30,000 units,
average O&M Charges per year Rs.20,000/-, Grid Rate per unit Rs.12/-.

Investment=10,00,000

Total amount generation per year = 30,000*12=3,60,000

O&M Charges per year = 20,000

Net gain per year = 3,60,000-20,000=3,40,000

Net gain for 10 years=34,00,000

Savings= 34,00,000-10,00,00=24,00,000 rs/-

Question 0550:

Make a one page marketing leaflet explaining why a residential society should install a solar power
plant.

They offer cost savings

The biggest advantage of installing rooftop solar panels is that they offer cost savings. The tariff rates for
rooftop solar in comparison to industrial and commercial tariff rates are cheaper by 17% and 27%
respectively. Rooftop solar installations are also attaining grid parity in many residential sectors of India.
For building owners, rooftop solar installations can even help in cutting down electricity bills. Rooftop
panels supply electricity to buildings, so they need to buy less electricity from the grid thereby saving on
energy costs.

It is a secure investment
Electricity prices keep on fluctuating from time to time. So, it is difficult to calculate the expenditure on
electricity for a certain period of time. However, when it comes to electricity generated by solar
rooftops, the price of power generated can be calculated easily. In fact, one can even calculate the cost
of electricity generation for another 10 years. In this way, it is a secure investment.

It increases access to energy

Though the deficiency of power in India is decreasing rapidly, still there are many people both in the
rural and urban areas, who have improper and unreliable access to electricity. These people are forced
to rely on alternatives like diesel generators. These alternatives pose harmful effects on the health and
they are volatile in terms of their operating costs. In such a scenario, solar energy serves as an affordable
source of electricity. Since rooftop solar panels harness the power of the sun to generate electricity,
they are eco-friendly. Furthermore, their cost of operation is also stable.
Support from the government
In order to encourage people to adopt solar energy, the government offers tax credits to those who
install rooftop solar panels whether it be for residential or commercial purposes. As per the Ministry of
New and Renewable Energy, the government pays 30% of the installation cost as a subsidy to the
installer.

Reduces carbon footprints

Solar panels harness sunlight to generate electricity. So, they pose fewer pollution risks to the
environment in comparison to conventional sources of energy. Unlike a generator, they run without
producing any noise and give out lesser emissions of harmful gases. Furthermore, it is a good source of
energy that combats climate change. Thus, rooftop solar is ideal as it reduces carbon footprints.

Green source of energy

This is an era where more and more people are adopting eco-friendly items. The consumers, especially
industrial and commercial consumers, are willing to make capital investments to contribute towards the
preservation of the environment. Environment-friendly customers are even willing to pay higher than
grid power.

Low maintenance cost

The chief factor that accentuates the importance of rooftop solar panels is that they require very less
maintenance. They come with a service life of over 20 years if maintained properly.

Suitable for Indian climate

Rooftop solar panels utilize sunlight to convert it into electricity. India is situated at an ideal geographical
location and receives ample tropical sunlight. There are almost 300 sunny days with clear skies each year
in India. Thus, rooftop solar panels are ideal to be used here.

Multiple applications of solar power

Along with the generation of electricity, solar power can meet several other purposes. It can be used to
heat water and supply hot water or air to a building. It can also be used to run electric generators.

It doesn’t require additional space for installation

One of the biggest advantages of rooftop solar panels is that they can be installed on any type of roof.
So, people don’t need to vacate a land or invest in buying additional land to set up rooftop solar panels.
Furthermore, the panels offer protection to the roof of the building in which they are installed