You have been approached by a developer with South Carolina solar project. Your manager wants to...
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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 company's 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% 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? 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 company's 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% 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?
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Answer rating: 100% (QA)
SOLUTION To calculate the IRR and NPV of the project we first need to calculate the aftertax cash fl... View the full answer
Related Book For
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey
Posted Date:
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