2. A new 300 MW wind farm costs $600 M to build (development costs, turbines, etc.)...
2. A new 300 MW wind farm costs $600 M to build (development costs, turbines, etc.) and is expected to produce 2 million MWh of electricity each year. The firm receives $30/MWh for its electricity and $35/MWh for its REC under a 20 year contract. The firm also receives a Production Tax Credit equal to $22/MWh but only for the first 10 years. The operations and maintenance expense of the wind farm is $18 M per year and is expected to rise 2.5% per year.
- If it costs the firm 10% interest to borrow the funds to build the wind farm and they use all the net proceeds (total revenue minus O&M) to pay down debt, during what year can all the debt be paid off?
- If the interest rate drops to 6%, during what year can all the debt be paid off?
- If the production tax credit were eliminated but the price of electricity rises to $60/MWh due to the clean power plan, during what year can all the debt be paid off?
Homework Answers
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2. A new 300 MW wind farm costs $600 M to build (development
costs, turbines, etc.)...
Consider the following information for a wind farm: 300 MW wind farm. Fixed costs - $1.2...
Consider the following information for a wind farm: 300 MW wind farm. Fixed costs - $1.2 M/MW, Operating Costs/kWh $1500/MWh, Class 4 wind site, 33% capacity factor, 10 miles to grid≈ $350,000/mile, 6%/15 year financing, 100% financed, Hence consider this interest rate on total cost for 15 years, 25 year project life, Determine Cost of Energy – COE.
Plains Wind Energy manufactures wind turbines used in the production of electric power. The firm is...
Plains Wind Energy manufactures wind turbines used in the production of electric power. The firm is experiencing financial difficulty due to the recent development of competing sources of energy in the form of extensive shale oil production capacity that is profitable at a $30 per barrel price for West Texas Intermediate crude. The associated supply-related decline in the price of energy has reduced demand for Plains’ wind turbines, causing the value of Plains’ outstanding issue of zero coupon bonds that...
5. Plains Wind Energy manufactures wind turbines used in the production of electric power. The firm...
5. Plains Wind Energy manufactures wind turbines used in the production of electric power. The firm is experiencing financial difficulty due to the recent development of competing sources of energy in the form of extensive shale oil production capacity that is profitable at a $30 per barrel price for West Texas Intermediate crude. The associated supply-related decline in the price of energy has reduced demand for Plains' wind turbines, causing the value of Plains' outstanding issue of zero coupon bonds...
ABC Pty Ltd produces turbines used in the production of hydro-electric generating equipment. The turbines are...
ABC Pty Ltd produces turbines used in the production of
hydro-electric generating
equipment. The turbines are sold to various engineering
companies that produce hydropowered generators in Australia.
Details of the operations for the coming four months are
provided in the attached excel
spread sheet.
Other information:
• The company plans to purchase land for future expansion
• Sales are on credit. Amounts not received in the month
following the sale are
written off as bad debt immediately.
• The payment...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following: a. A bond that has a $1.000 par value (face value) and a contract or coupon interest rate of 12.4 percent that is paid semiannually. The bond is currently selling for a price of $1,125 and will mature in 10...
Debt-free, Inc., an unlevered firm, is planning to use debt in its capital structure. The firm...
Debt-free, Inc., an unlevered firm, is planning to use debt in its capital structure. The firm currently has 5,000 shares outstanding trading at $60 per share. The firm plans to sell 150 6% annual-coupon, 10-year bonds at their face values of $1,000 each and use the proceeds to repurchase some of its shares. When the bonds mature, Debt-free, Inc. plans to reissue new bonds to pay off the principal and to “roll over” its debt this way indefinitely. Assume the...
I really need the Annual Total Revenue, Explicit Costs, Total Yearly Explicit Costs, Listed Implicit Costs,...
I really need the Annual Total Revenue, Explicit Costs, Total Yearly Explicit Costs, Listed Implicit Costs, Total Yearly Implicit Costs, Yearly Accounting Profits, and Yearly Economic Profits. Clear answers to these specific things would be super helpful!! Thanks. A business entrepreneur has recently leased a small herbicide production factory. The production facility rent costs him $180 per day. In addition, he must pay $85 for the lease on conveyor line, $48 for maintenance costs, $76 for utilities, $52 for interest...
A company is considering building a new and improved production facility for one of its existing...
A company is considering building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $500,000; it has a current market value of $800,000. The building can be erected for $600,000. Machinery (equipment) worth $120,000 needs to be bought. The company will finance the construction of the building and the purchase of the...
Consider an unincorporated firm with a two period (1 and 2) time horizon. At the beginning...
Consider an unincorporated firm with a two period (1 and 2) time horizon. At the beginning of period 1, the firm has a predetermined capital stock, K. Důring period 1, gross investment expenditure, I, financed out of retained earnings, are incurred with the purpose of both maintaining and increasing the capital stock in period 2. In each of the two periods, the capital stock depreciates at a rate 6, so at the beginning of period 2, the firm's capital stock...
Additional Information (for all entries; please see the posted Excel spreadsheet): Sales for 2020 are $310,000....
Additional Information (for all entries; please see
the posted Excel spreadsheet):
Sales for 2020 are $310,000. All sales are on credit.
Gross Margin ratio is 40 percent
Accounts Receivable:
$190,000 of the accounts receivable is paid by the end of the
year (the remaining balance remains on the balance sheet).
$4,000 of A/R is written off during the year.
5% of A/R (after write-off and collections) is considered to be
uncollectible.
Inventory:
Inventory purchases are $180,000, all on credit.
All...
5. Plains Wind Energy manufactures wind turbines used in the production of electric power. The firm is experiencing financial difficulty due to the recent development of competing sources of energy in the form of extensive shale oil production capacity that is profitable at a $30 per barrel price for West Texas Intermediate crude. The associated supply-related decline in the price of energy has reduced demand for Plains' wind turbines, causing the value of Plains' outstanding issue of zero coupon bonds...
ABC Pty Ltd produces turbines used in the production of
hydro-electric generating
equipment. The turbines are sold to various engineering
companies that produce hydropowered generators in Australia.
Details of the operations for the coming four months are
provided in the attached excel
spread sheet.
Other information:
• The company plans to purchase land for future expansion
• Sales are on credit. Amounts not received in the month
following the sale are
written off as bad debt immediately.
• The payment...
(Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this, compute the cost of capital for the firm for the following: a. A bond that has a $1.000 par value (face value) and a contract or coupon interest rate of 12.4 percent that is paid semiannually. The bond is currently selling for a price of $1,125 and will mature in 10...
Consider an unincorporated firm with a two period (1 and 2) time horizon. At the beginning of period 1, the firm has a predetermined capital stock, K. Důring period 1, gross investment expenditure, I, financed out of retained earnings, are incurred with the purpose of both maintaining and increasing the capital stock in period 2. In each of the two periods, the capital stock depreciates at a rate 6, so at the beginning of period 2, the firm's capital stock...
Additional Information (for all entries; please see
the posted Excel spreadsheet):
Sales for 2020 are $310,000. All sales are on credit.
Gross Margin ratio is 40 percent
Accounts Receivable:
$190,000 of the accounts receivable is paid by the end of the
year (the remaining balance remains on the balance sheet).
$4,000 of A/R is written off during the year.
5% of A/R (after write-off and collections) is considered to be
uncollectible.
Inventory:
Inventory purchases are $180,000, all on credit.
All...
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