Relationship between present worth and the interest rate

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A company plans to erect biggest wind farms in the world with 200 wind turbines costing some $1.69 million each. Generating power from wind is not profitable for companies without government tax breaks. The following financial and technical data have been compiled for further considerations: a. Number of wind turbines to be built: 200 units b. Project life: 20 years c. Salvage value of the wind turbines after 20 years: $0 d. Operating revenues: $32,315,640/yr e. Federal Tax credit: $17,108,280/yr f. Annual easement cost: $ 4000 per turbine per year g. Annual operating and maintenance cost: $16,300 per turbine per year h. Annual Tax paid: $ 3,972,760

Using the spreadsheet functions,

A. Tabulate the net cash flow for the project

B. Tabulate the net present worth as a function of interest rate.

C. Determine the IRR on this investment by plotting the relationship between present worth and the interest rate.

D. If the Company’s MARR is known to be 10%, is the investment justified.

Reference no: EM131165680

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