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

Expert Solution

Inflation	2.60%		Interest Rate	30%		Price of MWH	80+70	150
Discount rate	10%		Annual production	0.3124363 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 2 months ago

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