Question 1 (20 Marks)

The ABC Development Agency is planning construction of a wind-farm at a cost of N$29.2m, and will generate 50000 MWh per year, which it can sell into the grid as a Feed-In-Tariff at N$1.25/kWh or N$1250/MWh fixed for the next 20 yrs.

1. What is the Net Present Value of the project? 15 marks
2. Is the project worthwhile if ABC uses 20% as its discount rate for project of this level of risk? 5 marks