Initial Situation: The Wageningen Windmill Corporation has received a contract to provide wind-generated power to Wingate University, on the following terms: WWC will install a traditional Dutch-style windmill on the Wingate main campus at a total installed cost of $1.4 million. Once installed, there are no operating costs for the windmill. Wingate is contractually entitled to all of the electricity generated by the windmill, and is contractually obligated to pay WWC a fixed amount of $225,000 per year. The term of the agreement is 10 years. At the end of the term, WMC estimates that there will be very little useful life to the windmill. Therefore WWC estimates that it will be able to sell the windmill for scrap value of \"$100,000 at the end of the contract. Although it is a C Corporation, WWC receives significant tax credits related to its renewable energy activities, and WWC is able to write-off the equipment cost over a ten year period for tax purposes. Therefore WWC expects to pay no taxes for at least the next decade. WWC intends to finance the project with $1.0 million in debt (carrying a 5% interest rate) that will be repaid at the end of the contract, and $0.4 million in equity (WMC estimates that its cost of equity is 12%): Question: What is the Net Present Value of this project for WMC? Use the attached spreadsheet. WWC Equipment Tax Term Investment Deduction Base Fee Other Income Other Expense Taxes Cash Flow (1,400) (1,400) 140 1 Base Fee (Wingate Pays) 1 Bid amount to Wingate W N H 140 Combined Tax Rate 0% 140 Pre-Tax Cost of Debt 0.0% 4 140 Cost of Equity 0.0% 140 % Debt 0% 140 % Equity 0% w 140 WACC 0.0% 60 00 140 UT 140 NPV ($1,390) 10 140 IRR #NUM