Question
In: Finance
1-20 years Average hourly power output per turbine 0.31 MWh
1-20 years
|
Average hourly power output per turbine |
0.31 |
MWh |
|
|
Operational days per year |
363.00 |
days |
|
|
Capital expenditure per turbine |
3,000,000.00 |
$ |
|
|
Life |
20.00 |
years |
Turbines will be dismantled at end of 20 years if not overhauling. |
|
Salvage per turbine |
200,000.00 |
$ |
Market value at end of 20 years. |
|
Expected price per MWh of power in first year |
80.00 |
$ |
Price per MWh is then expected to increase at inflation. |
|
Expected price per MWh of renewable energy certificate in first year |
70.00 |
$ |
For each MWh generated by the wind turbines, SAI will be issued with a renewable energy certificate which it can sell to electricity retailers who have sold renewable energy to customers. Price of certificates is then expected to increase at inflation. |
|
Expected operating expenses per turbine in first year |
100,000.00 |
$ |
Annual operating expenses then expected to increase by inflation. |
|
Depreciation method |
Straight Line |
||
|
Working capital |
- |
$ |
Given service agreements, there is no working capital requirement |
|
Inflation Rate (p.a.) |
0.026 |
||
|
Tax Rate |
0.30 |
Tax payment occurs at the same year as income |
|
|
Discount Rate |
0.10 |
||
|
Additional Information to extend life to 40 years |
|||
|
Overhaul cost at end of 20th year per turbine |
1,500,000.00 |
$ |
|
|
Life of overhaul |
20.00 |
years |
|
|
Salvage |
- |
$ |
|
|
Depreciation method of overhaul cost |
Straight Line |
Overhaul expense is capitalised and then depreciated over extended life. |
|
|
Treatment of existing capital expenditure (e.g. original outlay) |
- |
$ |
Remaining book value of original capital expenditure written down to zero in year 20. |
Calculate the free cash flows for the extended life of 40 years
Solutions
Expert Solution
| Inflation | 2.60% | Interest Rate | 30% | Price of MWH | 80+70 | 150 | |||
| Discount rate | 10% | Annual production | 0.31*24*363 MWH | 2700.72 | |||||
| Year | Cash outflow | Revenue | Operation cost | Depreciation | Cash before Tax | Tax | Cash after Tax | Add back Depreciation | Net free cash flow from operation |
| 0 | -$30,00,000.00 | -$30,00,000.00 | $0.00 | $0.00 | $0.00 | -$30,00,000.00 | |||
| 1 | $4,05,108.00 | -$1,00,000.00 | -$1,40,000.00 | $1,65,108.00 | -$49,532.40 | $1,15,575.60 | $1,40,000.00 | $2,55,575.60 | |
| 2 | $4,15,640.81 | -$1,02,600.00 | -$1,40,000.00 | $1,73,040.81 | -$51,912.24 | $1,21,128.57 | $1,40,000.00 | $2,61,128.57 | |
| 3 | $4,26,447.47 | -$1,05,267.60 | -$1,40,000.00 | $1,81,179.87 | -$54,353.96 | $1,26,825.91 | $1,40,000.00 | $2,66,825.91 | |
| 4 | $4,37,535.10 | -$1,08,004.56 | -$1,40,000.00 | $1,89,530.55 | -$56,859.16 | $1,32,671.38 | $1,40,000.00 | $2,72,671.38 | |
| 5 | $4,48,911.02 | -$1,10,812.68 | -$1,40,000.00 | $1,98,098.34 | -$59,429.50 | $1,38,668.84 | $1,40,000.00 | $2,78,668.84 | |
| 6 | $4,60,582.70 | -$1,13,693.81 | -$1,40,000.00 | $2,06,888.90 | -$62,066.67 | $1,44,822.23 | $1,40,000.00 | $2,84,822.23 | |
| 7 | $4,72,557.85 | -$1,16,649.84 | -$1,40,000.00 | $2,15,908.01 | -$64,772.40 | $1,51,135.61 | $1,40,000.00 | $2,91,135.61 | |
| 8 | $4,84,844.36 | -$1,19,682.74 | -$1,40,000.00 | $2,25,161.62 | -$67,548.48 | $1,57,613.13 | $1,40,000.00 | $2,97,613.13 | |
| 9 | $4,97,450.31 | -$1,22,794.49 | -$1,40,000.00 | $2,34,655.82 | -$70,396.75 | $1,64,259.07 | $1,40,000.00 | $3,04,259.07 | |
| 10 | $5,10,384.02 | -$1,25,987.15 | -$1,40,000.00 | $2,44,396.87 | -$73,319.06 | $1,71,077.81 | $1,40,000.00 | $3,11,077.81 | |
| 11 | $5,23,654.00 | -$1,29,262.81 | -$1,40,000.00 | $2,54,391.19 | -$76,317.36 | $1,78,073.83 | $1,40,000.00 | $3,18,073.83 | |
| 12 | $5,37,269.01 | -$1,32,623.65 | -$1,40,000.00 | $2,64,645.36 | -$79,393.61 | $1,85,251.75 | $1,40,000.00 | $3,25,251.75 | |
| 13 | $5,51,238.00 | -$1,36,071.86 | -$1,40,000.00 | $2,75,166.14 | -$82,549.84 | $1,92,616.30 | $1,40,000.00 | $3,32,616.30 | |
| 14 | $5,65,570.19 | -$1,39,609.73 | -$1,40,000.00 | $2,85,960.46 | -$85,788.14 | $2,00,172.32 | $1,40,000.00 | $3,40,172.32 | |
| 15 | $5,80,275.01 | -$1,43,239.58 | -$1,40,000.00 | $2,97,035.43 | -$89,110.63 | $2,07,924.80 | $1,40,000.00 | $3,47,924.80 | |
| 16 | $5,95,362.16 | -$1,46,963.81 | -$1,40,000.00 | $3,08,398.35 | -$92,519.51 | $2,15,878.85 | $1,40,000.00 | $3,55,878.85 | |
| 17 | $6,10,841.58 | -$1,50,784.87 | -$1,40,000.00 | $3,20,056.71 | -$96,017.01 | $2,24,039.70 | $1,40,000.00 | $3,64,039.70 | |
| 18 | $6,26,723.46 | -$1,54,705.28 | -$1,40,000.00 | $3,32,018.18 | -$99,605.45 | $2,32,412.73 | $1,40,000.00 | $3,72,412.73 | |
| 19 | $6,43,018.27 | -$1,58,727.62 | -$1,40,000.00 | $3,44,290.66 | -$1,03,287.20 | $2,41,003.46 | $1,40,000.00 | $3,81,003.46 | |
| 20 | -$15,00,000.00 | $6,59,736.75 | -$1,62,854.53 | -$1,40,000.00 | -$11,43,117.79 | $3,42,935.34 | -$8,00,182.45 | $1,40,000.00 | -$6,60,182.45 |
| 21 | $6,76,889.90 | -$1,67,088.75 | -$85,000.00 | $4,24,801.15 | -$1,27,440.34 | $2,97,360.80 | $85,000.00 | $3,82,360.80 | |
| 22 | $6,94,489.04 | -$1,71,433.06 | -$85,000.00 | $4,38,055.98 | -$1,31,416.79 | $3,06,639.19 | $85,000.00 | $3,91,639.19 | |
| 23 | $7,12,545.75 | -$1,75,890.32 | -$85,000.00 | $4,51,655.44 | -$1,35,496.63 | $3,16,158.80 | $85,000.00 | $4,01,158.80 | |
| 24 | $7,31,071.94 | -$1,80,463.47 | -$85,000.00 | $4,65,608.48 | -$1,39,682.54 | $3,25,925.93 | $85,000.00 | $4,10,925.93 | |
| 25 | $7,50,079.81 | -$1,85,155.52 | -$85,000.00 | $4,79,924.30 | -$1,43,977.29 | $3,35,947.01 | $85,000.00 | $4,20,947.01 | |
| 26 | $7,69,581.89 | -$1,89,969.56 | -$85,000.00 | $4,94,612.33 | -$1,48,383.70 | $3,46,228.63 | $85,000.00 | $4,31,228.63 | |
| 27 | $7,89,591.02 | -$1,94,908.77 | -$85,000.00 | $5,09,682.25 | -$1,52,904.67 | $3,56,777.57 | $85,000.00 | $4,41,777.57 | |
| 28 | $8,10,120.39 | -$1,99,976.40 | -$85,000.00 | $5,25,143.99 | -$1,57,543.20 | $3,67,600.79 | $85,000.00 | $4,52,600.79 | |
| 29 | $8,31,183.52 | -$2,05,175.78 | -$85,000.00 | $5,41,007.73 | -$1,62,302.32 | $3,78,705.41 | $85,000.00 | $4,63,705.41 | |
| 30 | $8,52,794.29 | -$2,10,510.35 | -$85,000.00 | $5,57,283.93 | -$1,67,185.18 | $3,90,098.75 | $85,000.00 | $4,75,098.75 | |
| 31 | $8,74,966.94 | -$2,15,983.62 | -$85,000.00 | $5,73,983.31 | -$1,72,194.99 | $4,01,788.32 | $85,000.00 | $4,86,788.32 | |
| 32 | $8,97,716.08 | -$2,21,599.20 | -$85,000.00 | $5,91,116.88 | -$1,77,335.06 | $4,13,781.82 | $85,000.00 | $4,98,781.82 | |
| 33 | $9,21,056.70 | -$2,27,360.78 | -$85,000.00 | $6,08,695.92 | -$1,82,608.78 | $4,26,087.14 | $85,000.00 | $5,11,087.14 | |
| 34 | $9,45,004.17 | -$2,33,272.16 | -$85,000.00 | $6,26,732.01 | -$1,88,019.60 | $4,38,712.41 | $85,000.00 | $5,23,712.41 | |
| 35 | $9,69,574.28 | -$2,39,337.23 | -$85,000.00 | $6,45,237.05 | -$1,93,571.11 | $4,51,665.93 | $85,000.00 | $5,36,665.93 | |
| 36 | $9,94,783.21 | -$2,45,560.00 | -$85,000.00 | $6,64,223.21 | -$1,99,266.96 | $4,64,956.25 | $85,000.00 | $5,49,956.25 | |
| 37 | $10,20,647.57 | -$2,51,944.56 | -$85,000.00 | $6,83,703.01 | -$2,05,110.90 | $4,78,592.11 | $85,000.00 | $5,63,592.11 | |
| 38 | $10,47,184.41 | -$2,58,495.12 | -$85,000.00 | $7,03,689.29 | -$2,11,106.79 | $4,92,582.50 | $85,000.00 | $5,77,582.50 | |
| 39 | $10,74,411.21 | -$2,65,215.99 | -$85,000.00 | $7,24,195.21 | -$2,17,258.56 | $5,06,936.65 | $85,000.00 | $5,91,936.65 | |
| 40 | $11,02,345.90 | -$2,72,111.61 | -$85,000.00 | $7,45,234.29 | -$2,23,570.29 | $5,21,664.00 | $85,000.00 | $6,06,664.00 |
jeff jeffy answered 1 week agoRelated Solutions
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Average hourly power output per turbine: 0.31
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Life 20.00 years (Turbines will be dismantled
at end of 20 years if not overhauling.)
Salvage per turbine $200,000.00 (Market value
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Expected price per MWh of power in first year
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