A delafossite semiconductor, namely CuAlO2, with a lower band gap is a potential candidate for the absorption of solar radiation due to its excellent electronic and optical properties. In this paper, structural, electronic, vibrational and optical properties of delafossite CuAlO2 have been calculated using state-of-the-art first principles calculations based on density functional theory (DFT). The optimized structural parameters, electronic properties and Raman active vibrational modes namely the E-g and A(1g) are in good agreement with experimental and other theoretical data. The full phonon dispersion curves (PDC) together with the phonon density of states (PHDOS) of CuAlO2 depict its dynamical stability due to non-existence of any imaginary phonon mode in the entire Brillouin zone (BZ). To understand the mechanism of optical transition properties, we have further calculated the dielectric functions, absorption coefficient and joint density of states (JDOS) for delafossite, CuAlO2. The dielectric constant and absorption coefficient show a significant anisotropic nature in the components of polarization directions. Solar cell parameters of CuAlO2 are also calculated and the highest theoretical efficiencies of 14.8% and 12.5% have been observed with Shockley-Queisser (SQ) limit and spectroscopic limited maximum efficiency (SLME) respectively. The SLME predicted efficiency agrees better to the experimental value as it includes the thickness dependent absorbance coefficient in account of non-radiative recombination and carrier loss mechanism.