Task:

AAA Investment Fund has a solar energy project under evaluation. The initial investment of this project includes land purchase and a solar energy generating system. AAA Investment Fund has no plan to operate it forever. Their strategy is to set up the energy plant and sell the energy to the spot market as a long-term project. As a financial analyst of AAA Investment Fund, your manager asked you to evaluate the project and offer advice on which solar panel system they should adopt. The detailed information is as below:

1. The project life is 25 years.
2. The land cost $6 million. The land is expected to appreciate by 2% per year over 25 years. Assume your cost of land is a fair market value and you are expected to sell the land at fair market value by the end of 25 years.
3. You have a choice of choosing fixed solar panels or rotating solar panel systems.

• 1 MWh (1000 kW per hour) system of rotating panel systems costs $1.45 million. Your purchased land allows you to build a 25MWh system. A rotating solar system is more efficient in producing solar energy with an average output of 5.6 hours per day. The maintenance cost is about 10% of the sales revenue.
• If you use fixed solar panel systems. 1MWh (1000 kW per hour) system costs $1.2 million. You can build a 30MWh system as the fixed systems require less space. However, the effective output from the average daily sunshine is about 4.5 hours. The maintenance cost is about 8% of the sales revenue.

1. You can sell your electricity to the spot market at a price of $100 per MWh in the first three years and then the price will increase by $4 every three years. You will also get a government bonus of $80 per MWh (e.g., Large-Scale Generation Certificate) for the first 5 years.
2. After 25 years, it will cost you $60,000 to clean the site.
3. Additional assumptions:

• - The discount rate for the project is 10%.
• - The tax rate is constant at 30%. Capital gains tax is 15% for land sales after 25 years (50% discount of the normal tax rate).
• - Straight-line depreciation of solar panel system.
• - 365 days per year.
• - Both systems will lose 0.75% efficiency per year.
• - The project requires $100,000 working capital for liquidity purposes (It will be refunded fully by the end of the project).

Key inputs
Project life	25	years
Land cost	6000000	$
Land appreciation rate	2.00%	p.a
Sale price per MWh	100	$
Price increase per 3 years	4	$
First 5-year gov rebate per MWh	80	$
Cleaning cost by the end of project	60000
Discount rate for the project	10%	p.a
Tax	30%
Discounted capital gain tax	15%
Days per year	365
Efficiency lose yearly	0.75%	p.a
Working capital required	100000	$
Solar Panel System
Rotating system
Installation cost per MWh	1450000	$
Total installed capacity	25	MWh
Effective hours per day	5.6
cost percentage of sales	10%
depreciation	straight line over 25 years
Salvage value in 25 years	12000	$
Fixed system
Installation cost per MWh	1200000	$
Total installed capacity	30	MWh
Effective hours per day	4.5
cost percentage of sales	8%
depreciation	straight line over 25 years
Salvage value in 25 years	10000	$

By using all data provided, I would like you to structure a DCF table to calculate the NPV of each project and also to conduct a DCF analysis and sensitivity analysis on an Excel spreadsheet to decide which investment option is better.

Especially, I would like to know where in a DCF model I need to put in the price of the land and the appreciation, as well as the capital gains tax.