Question: If some information is missing, you can have assumptions. Just make sure that your assumptions will be mentioned on the answer Company A is evaluating

If some information is missing, you can have assumptions. Just make sure that your assumptions will be mentioned on the answer

Company A is evaluating an offshore investment in renewable energy to pay for its CO2-e emissions and sell the remainder (RECs) to the Australian market. The questions in this exam will present the theories and characteristics for this investment in RECs.

Assuming that Company A will generate 3M RECs in the offshore operation. Considering that the company's own consumption is 300,000 RECs/a will be used for the operation in Australia, 2,7MRECs/a will remain to be sold in the Australian market.

Assuming that in 2020 REC's price is $40 and in 2040 will be $50.

Question

Sensitivity analysis - Consider the sensitivity of your economic profit to changes in your estimated demand, fixed and variable costs. Use this to estimate an economic profit range for your business. Draw a graph and explain using words.

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