[bongobingo]

I find that most of these payoff periods are generous on one side, but lax on the other. For example, does the payoff calculator include the opportunity costs? I doubt it, because it would likely be impossible to ever achieve break even.

[tlb]

Payoff time calculations shouldn't include opportunity costs. Calculating opportunity cost would require knowing about every other possible project.

The right procedure is to calculate payoff periods for each project separately. Then, when deciding which projects to fund, you choose them starting with the shortest payoff times until your budget is used up.

[bongobingo]

Opportunity cost is simple. It’s a calculation of what your money could have been doing if you put it to use doing something else. The easiest to estimate is the market opportunity cost.

If you spend $10,000 on a solar installation that is $10,000 you could have put in the market. After 15 years you saved $10,000 in electricity, and you’re supposedly profiting. However, that $10,000 investment would have grown to $24,000 at a modest 6%. So you’re actually still in the red, and you’ll likely never catch up and break even.

If you took out a loan it’s the opportunity cost on the payments. There is actually a theoretical break even here, but it’s not 15 years.

If you’re doing it for some altruistic reasons then it doesn’t matter. But if you’re making a payback calculation, you should do it properly. Opportunity cost is a real thing.

[imtringued]

The opportunity cost for what? Half the reason why this particular project exists is that Biden has realized that the best way to bring money into the hands of people is by giving them a job that is useful to society.

As it is right now there is enough funding for every conceivable project, assuming the project is profitable (pays debts back) the only real limits are physical resources and unemployed workers and running out of unemployed workers is a policy goal. If we hit real limits, then interest rates will go up and lenders will demand greater returns, which may mean that a solar project like this may not get started and people start seeking out more productive ideas. However, the most important thing is that investments pay their debts back.

[bongobingo]

The opportunity cost for the cash you had to put down to install a solar array. Or the opportunity cost of the interest payments you’re making on a loan.