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Suppose you are required to analyse the nancing cash flows for UQ solar farm in Warwick. The investment cost of the project is 125 million
Suppose you are required to analyse the nancing cash flows for UQ solar farm in Warwick. The investment cost of the project is 125 million dollars and UQ has borrowed the full amount from Commonwealth Bank at an annual interest rate of 35%, The loan term equals the project life of 25 years. The solar farm is estimated to generate 120,000 megawatts (1 megawatt = 1000 kilowatts) of energy each year and will be sold to the grid at a xed Feedintariff rate of 1 5 cents per kilowatt. Assume a 5% discount rate, the NPV ofthe net cash flows of UQ solar farm is $ million and the IRR is %. If the loan interest rate will be increased by 2% pa. starting from year 6. The NPV will be changed to $ million and the IRR will be changed to %. By using the IRR rule, UQ should (accept/reject) the projects In your answer, decompose the principal, interest and net cash flow for UQ using a conversion factor of 100,000. Assume there are no taxes paid on this project. (hint: calculate the remaining principal owed on the remaining 20 years ofthe loan) Provide your answers to two decimal places. Do not include any commas ( ,) "$" or "W in your answers. Ensure you show all your working in your spreadsheet
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