Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You have been approached by a developer with South Carolina solar project. Your manager wants to understand how attractive S.C. market could be or not

You have been approached by a developer with South Carolina solar project. Your manager wants to understand how attractive S.C. market could be or not the particular opportunity is feasible and meets the companys investment criteria:

The Following part is the information regarding the project:

Investment Date: 2014

Commercial Operation Date: 2015

Life of Plant: 20 years (assume no terminal value)

Depreciation Assumptions: 5-year straight line depreciation (assume no salvage value)

Production per-year: 50,000 MWh

Price (you get for each MWh you deliver): $150/MWh (Price will be escalating at the rate of CPI)

CPI: 2.5%

Capital Expenditure: $40,000,000 (Cost of the Plant)

Operating Expenses: Operating expenses (COGS) are 25% of EBITDA for year 1 and escalating each year at CPI.

Investment Tax Credit: South Carolina provides 3% investment tax credit on the initial investment.

Taxes: 35%

First find the operating cash flows, investment and depreciation then the cash flow summary in order to calculate. Use Excel.

Based on the information provided, please calculate the IRR and NPV based on the after-tax cash flows and discount rate is 8%. What is your assessment?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ISE International Financial Management

Authors: Cheol Eun, Bruce Resnick, Tuugi Chuluun

9th International Edition

1260575314, 9781260575316

More Books

Students also viewed these Finance questions