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Please complete in excel and show all formulas (b) AAA energy company is considering a project of solar energy plant. There are two different systems
Please complete in excel and show all formulas
(b) AAA energy company is considering a project of solar energy plant. There are two different systems (rotating system and fixed system) under consideration. These two systems come with different cost and efficiency. Rotating system is better in efficiency and lasts for 10 years with higher cost. Fixed system is less efficient, but it lasts for 12 years and the cost is lower. The company has already secured the land usage contract for the energy plant. The local government has granted the company free usage of the land as long as it operates as support for green energy and environment. The company intends to operate the project for infinite time, which means that the systems will be replaced once they reached their maximum useful life. The project team provided some estimated figures as below: Detail Purchase Price Yearly Revenue Yearly Costs Salvage Value Useful Life Grade A $510,000 $135,000 ($12,000) $10,000 10 years Grade B $360,000 $100,000 ($7,000) $9,000 12 years Assuming it's a perfect capital market that there are no taxes or inflation, so the above figures won't change in the future. The project team conducted a further analysis and provided some information below: Project beta 1.4, risk free rate 5%.p.a, and market return 12%.p.a. Please complete the analysis for AAA energy company and provide advice on the choice of systemStep by Step Solution
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