Assume the renewable energy project is projected to be profitable and to have a significant NPV and attractive IRR. In no more than 1,050 words, prepare a white paper report with your recommendations that responds to the following questions:
•What is your financing strategy for the project? Consider construction-period financing and long-term financing alternatives.
•Do you recommend asset-backed financing or traditional portfolio financing?
•Which specific financial structure will you propose to the company treasurer?
•How will your proposed financing plan fit within the existing structure of your diversified energy company?
•What risk reduction techniques do you plan to employ?
•As a part of the financing strategy for the project, what types of assets might be considered appropriate to lease? Would hedging be employed in the strategy? Why or why not? What tax and other entity structure factors might make leasing appropriate?
Year
Revenue
Maint
Sales & Admin
Profits less depreciation
Tax @ 35%
Profit after tax
Add Back Deprection
PV of Cash Flows
Sum of PV of cash flows
Investment
Depreciation
Terminal Value
NPV
IRR 0 1
$6,000,000.00
$100,000.00
$180,000.00
$3,720,000.00
$1,302,000.00
$2,418,000.00
$4,418,000.00
-$40,000,000.00 $4,207,619.05
$78,708,644.44 2
$6,120,000.00
$100,000.00
$180,000.00
$3,840,000.00
$1,344,000.00
$2,496,000.00
$4,496,000.00
$4,078,004.54 3
$6,426,000.00
$100,000.00
$180,000.00
$4,146,000.00
$1,451,100.00
$2,694,900.00
$4,694,900.00
$4,055,631.14 4
$6,747,300.00
$100,000.00
$180,000.00
$4,467,300.00
$1,563,555.00
$2,903,745.00
$4,903,745.00
$4,034,323.15 5
$7,084,665.00
$100,000.00
$180,000.00
$4,804,665.00
$1,681,632.75
$3,123,032.25
$5,123,032.25
$4,014,029.82 6
$7,438,898.25
$100,000.00
$180,000.00
$5,158,898.25
$1,805,614.39
$3,353,283.86
$5,353,283.86
$3,994,702.84 $40,000,000.00
$2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $48,130,881.52 $48,130,881.52
7.68% 7
$7,810,843.16
$100,000.00
$180,000.00
$5,530,843.16
$1,935,795.11
$3,595,048.06
$5,595,048.06
$3,976,296.19 8
$8,201,385.32
$100,000.00
$180,000.00
$5,921,385.32
$2,072,484.86
$3,848,900.46
$5,848,900.46
$3,958,766.05 9
$8,611,454.59
$100,000.00
$180,000.00
$6,331,454.59
$2,216,009.11
$4,115,445.48
$6,115,445.48
$3,942,070.68 10
$9,042,027.32
$100,000.00
$180,000.00
$6,762,027.32
$2,366,709.56
$4,395,317.76
$6,395,317.76
$3,926,170.33 11
$9,494,128.68
$101,000.00
$180,000.00
$7,213,128.68
$2,524,595.04
$4,688,533.64
$6,688,533.64
$3,910,647.10 12
$9,968,835.12
$102,010.00
$180,000.00
$7,686,825.12
$2,690,388.79
$4,996,436.33
$6,996,436.33
$3,895,877.54 13
$10,467,276.87
$103,030.10
$180,000.00
$8,184,246.77
$2,864,486.37
$5,319,760.40
$7,319,760.40
$3,881,825.22 14
$10,990,640.72
$104,060.40
$180,000.00
$8,706,580.31
$3,047,303.11
$5,659,277.20
$7,659,277.20
$3,868,455.46 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 $2,000,000.00 15
$11,540,172.75
$105,101.01
$180,000.00
$9,255,071.75
$3,239,275.11
$6,015,796.63
$8,015,796.63
$3,855,735.24 16
$12,117,181.39
$106,152.02
$180,000.00
$9,831,029.37
$3,440,860.28
$6,390,169.09
$8,390,169.09
$3,843,633.13 17
$12,723,040.46
$107,213.54
$180,000.00
$10,435,826.92
$3,652,539.42
$6,783,287.50
$8,783,287.50
$3,832,119.24 $2,000,000.00 $2,000,000.00 $2,000,000.00 18
19
20
$13,359,192.48 $14,027,152.10 $14,728,509.71
$108,285.67
$109,368.53
$110,462.21
$180,000.00
$180,000.00
$180,000.00
$11,070,906.81 $11,737,783.58 $12,438,047.50
$3,874,817.38 $4,108,224.25 $4,353,316.62
$7,196,089.43 $7,629,559.33 $8,084,730.87
$9,196,089.43 $9,629,559.33 $10,084,730.87
$3,821,165.10 $3,810,743.62 $3,800,829.00 $2,000,000.00 $2,000,000.00 $2,000,000.00
$25,000,000.00
$9,422,237.07
