Financial Theory and Valuation

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Dawson company is considering a new project to construct a solar en- ergy park that will cost 30 million euro to build and have a yearly electricity production of 1500 megawatts. The current price of electric- ity is 5000 euro/MW and it is expected to increase by 1.5% per year in perpetuity. The annual maintenance and service cost is expected to be 4 million euro and it is also expected to increase by 1.5% per year in future. Dawson will pay 24.0% corporate income tax on the earnings of this project. Before tax cost of debt of Dawson is 6.50% and its cost of equity is 11.50%. The project has risk similar to that of the operation of the firm, and the target debt-to-equity ratio is 1.5. - What is the NPV of this project? 7