ONLINE

CERTIFICATION
PROGRAM
INSTALLATION
OF SOLAR
POWER PLANTS

MODULE 1 D

INVESTMENT, ROI, IRR

Pg 2 Module 1D

INVESTMENT, RETURN ON
INVESTMENT, INTERNAL ONLINE CERTIFICATION PROGRAM -
RATE OF RETURN, INSTALLATION OF SOLAR POWER
SAVINGS: PLANTS:

Investment is an action or Module 1:

intention to hold something 1 a. How Solar Works
such that the value of such
1 b. Installation and working of
something is expected to
increase. The success of
solar power plant
such increase in value is 1 c. Business Models
based upon accuracy of 1 d. Investment, Saving, Return
projection based on on investment, Internal Rate of
scientific formula and
Return
experience.

We can consider investment

in time, talent, skill, any
material or non-material
subject, rights, patent,
exclusive invention and
innovation and so on.
However, when we talk
about investment, we
normally speak about
investment in the form of
money.
Pg 3 Module 1D

INVESTMENT:
Investment is basically about two
factors, investment value and time
value.
An investment is the purchase of goods
that are not consumed today but are
used in the future to create wealth.
An  investment  can also be 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. There is also a risk and return factor
Investments are done based on when we consider investment. It is
expecting periodical returns and or presumed that if we expect higher
returns on investment, it comes with
increase in the value of such investment.
higher risk. There may not be any
Say for example I invest in fixed deposit
guarantee that higher returns will come
of Rs.100/- in bank. The bank will pay after taking higher risk. It is also possible
me an annual return of Rs.7/- at the end that there is decrease in the value of
of the year. The Rs.100/- will remain investment after certain period.
intact and will be returned at the time of Hence, the rate of return is based on the
maturity (expiry) of the Fixed Deposit. type of investment you make. Generally,
it is lower the risk lower the return with
There is also an option that I do not
high safety of the investment. Such as
receive Rs.7/- annually and the same
Fixed deposit in bank. There are
can be re-invested in the Fixed Deposit. investments where the risks are high,
In such case, I will not receive Rs.7/- and returns are high with low safety of
every year but will receive say Rs.170/- the investment. Such as investment in
at the end of six years. shares.
Pg 4 Module 1D

RETURN ON INVESTMENT: SAVINGS:

Return on investment is the (+/-) Saving is a very wide word as
income/profit/increase in value of an definition. Saving can be a part of
investment in the period of one year. ROI income not spent. It can be also
is normally expressed in percentage for a part of expense not incurred.
comparison between various This saving can be built up in
investments. Return on investment is number of years and can
also considered as a parameter as to it become a huge wealth. Such
will take how many years to recover the savings can also be periodically
investment made from the income and prudently invested for better
received every year. Say for example if returns and wealth creation.
an investment is made of Rs.100/- and it
receives an income of Rs.20/- every
year, then it will take 5 years to recover
the investment. The ROI will be counted
as 20% p.a.
INTERNAL RATE OF RETURN:
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 a benchmark to understand the
attractiveness of an investment for the
investor to choose.
Pg 5 Module 1D

ILLUSTRATION:
Like any investment, investment in solar power plant is also a financial
consideration. So, let us take an example to understand all the factors
discussed earlier. Investment in Solar Power Plant Rs. 25,00,000/-
Average generation per year 70,000 units. Grid rate per unit: Goa: Rs.6/-,
Gujarat: Rs.10/- and Maharashtra: Rs.14/-

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