Certified Energy Auditor Certification Economic Analysis of Projects 4

Question 1

Under MACRS, commercial energy efficiency equipment is typically assigned which depreciation life?

Accepted Answer

7 years

Answer

Most commercial energy-efficiency equipment (HVAC, lighting, controls) qualifies as 7-year MACRS property under IRS asset class rules.

Question 2

The federal Investment Tax Credit (ITC) for a solar PV system reduces project economics by:

Accepted Answer

Directly reducing the net capital cost in the first year

Answer

The ITC is a dollar-for-dollar reduction in federal tax liability equal to a percentage of installed cost, effectively reducing the net first-year capital outlay.

Question 3

A utility offers a $50,000 rebate for an energy efficiency upgrade costing $200,000. How does the rebate affect the economic analysis?

Accepted Answer

It reduces the net installed cost to $150,000 for payback calculations

Answer

Utility rebates directly reduce the net first cost of the project, improving all economic metrics including payback, NPV, and IRR.

Question 4

For a tax-paying entity, the after-tax annual savings from an energy project are calculated by:

Accepted Answer

Multiplying gross savings by (1 − marginal tax rate)

Answer

After-tax savings = Gross savings × (1 − tax rate), since energy cost savings increase taxable income and create a tax liability.

Question 5

The depreciation tax shield in energy project analysis refers to:

Accepted Answer

The tax deduction created by annual depreciation expense

Answer

The depreciation tax shield is the annual tax reduction = depreciation expense × marginal tax rate, which improves after-tax cash flow.

Certified Energy Auditor Certification Practice Test

Certified Energy Auditor Certification Practice Test

Certified Energy Auditor Certification Economic Analysis of Projects 4