##### Scenario Energy One must choose between two renewable projects. Solar: upfront $12.5 M, VC $0, production 75 % of the year at 150,000 units and 25 % at 50,000 units, price $40/unit. Corn bio-power: upfront $2.5 M, VC $30/unit, constant output, price $40/unit. ##### Question a) Calculate the payback period (years until cumulative profit equals initial investment) for the solar project. b) Do the same for the corn project. c) Which project should Energy One pursue and why? ##### Hints Annual profit = revenue − variable cost. Use production profile for solar, constant for corn. Payback = initial investment / annual profit; compare results plus qualitative factors.

Evaluates payback-period calculations for solar and corn bio-power projects. Strong answers compute weighted annual solar output and profit, express corn payback as a function of annual units, and explain why simple payback should be supplemented with risk, NPV, and strategic analysis.

How do I approach Analytics & Experimentation interview questions?

Analytics & Experimentation questions require understanding of core concepts and practice. PracHub provides solutions with explanations to help you master analytics & experimentation interviews.

What difficulty level is this interview question?

This is a medium difficulty Analytics & Experimentation question, commonly asked during Technical Screen rounds at Capital One.

What role is this question designed for?

This question is commonly asked for Data Scientist candidates at Capital One during technical interviews.

Calculate Payback Period for Solar and Corn Projects

Energy One must choose between two renewable projects using a simple payback metric: years until cumulative profit equals upfront investment.

Assume:

Ignore discounting, taxes, depreciation, and fixed O&M.
Solar has variable cost $0/unit .
Corn bio-power has variable cost $30/unit .
Energy sells at $40/unit .

Constraints & Assumptions

Treat "units" as energy units sold at the stated price.
For solar, annual units are computed from the weighted production rates given.
For corn, annual output is not specified; express payback as a function of annual units unless the interviewer provides a value.
Show formulas and units.

Clarifying Questions to Ask Guidance

Are production rates annualized rates or actual annual quantities?
What annual output should be assumed for the corn project?
Are fixed costs, downtime, subsidies, or maintenance excluded intentionally?

Part 1 - Solar Payback

Solar has upfront cost $12.5 million, variable cost $0, production at 150,000 units for 75% of the year and 50,000 units for 25% of the year, and price $40/unit. Calculate payback period.

What This Part Should Cover Guidance

Weighted annual units.
Annual profit.
Payback period as upfront investment divided by annual profit.

Part 2 - Corn Bio-Power Payback

Corn bio-power has upfront cost $2.5 million, variable cost $30/unit, constant annual output, and price $40/unit. Calculate payback period.

What This Part Should Cover Guidance

Contribution margin per unit.
Payback formula as a function of annual output.
Plugging in any output provided by the interviewer.

Part 3 - Recommendation

How would you compare the two projects beyond simple payback?

What This Part Should Cover Guidance

Risk, scalability, capacity factor, fuel supply, emissions, reliability, incentives, NPV, IRR, and strategic fit.
Why simple payback can be misleading.

What a Strong Answer Covers Guidance

A strong answer computes payback carefully, handles missing output assumptions for corn, and explains why investment decisions need more than simple payback.

Follow-up Questions Guidance

What annual corn output gives a 2.5-year payback?
How would discounting change the comparison?
Which project has more operating risk?