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I have partially solved the problem. I still need help with the last part of A regarding inflation and part B A. You are asked
I have partially solved the problem. I still need help with the last part of A regarding inflation and part B
A. You are asked to evaluate the viability of a wind turbine project. A single, small-scale wind turbine costs $25,000 and can be sold as scrap after 25 years for $1,500. You would purchase a service contract for normal maintenance items at $750 per year. You can sell the energy created for $1250 a year, which is a bigger return than if you were to consume the energy yourself. Based on a NPV without discounting approach, is this small project viable? If inflation is 3.5%, at what initial cost does the project become viable if all other factors are unchanged? Cash out = 25,000 + ( 750 * 25) = Cash in = (1250 * 25) + 1500 = NPV = 32750 - 43750 = 43750 32750 -11000 NOT VIABLE B. Now, instead of assuming you invest $25,000 to buy the turbine at the beginning of the project, you make a downpayment of 10% ($2,500) and finance the rest with a loan with a 3% annual interest rate with monthly payments. (1) Determine whther this project is viable, and (2) If the project is not viable, what initial cost would make it so under these conditions? A. You are asked to evaluate the viability of a wind turbine project. A single, small-scale wind turbine costs $25,000 and can be sold as scrap after 25 years for $1,500. You would purchase a service contract for normal maintenance items at $750 per year. You can sell the energy created for $1250 a year, which is a bigger return than if you were to consume the energy yourself. Based on a NPV without discounting approach, is this small project viable? If inflation is 3.5%, at what initial cost does the project become viable if all other factors are unchanged? Cash out = 25,000 + ( 750 * 25) = Cash in = (1250 * 25) + 1500 = NPV = 32750 - 43750 = 43750 32750 -11000 NOT VIABLE B. Now, instead of assuming you invest $25,000 to buy the turbine at the beginning of the project, you make a downpayment of 10% ($2,500) and finance the rest with a loan with a 3% annual interest rate with monthly payments. (1) Determine whther this project is viable, and (2) If the project is not viable, what initial cost would make it so under these conditionsStep by Step Solution
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