The management of Deep Pocket Fund have requested that you provide a detailed financial analysis of...

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The management of Deep Pocket Fund have requested that you provide a detailed financial analysis of each option and prepare a report that recommends a preferred option. The following requests have been made about the analysis and report: - The financial analysis is to be completed in Excel. The file is to be easily adjustable for different scenarios and all inputs must be in the one sheet called ‘Assumptions’. The analysis of each solar system type must be on a separate sheet. - The report is to be short (600 words + 20% tolerance) and written in a manner that can be understood by a person with a basic understanding of financial analytical tools. - The report sections include: Summary, Methodology, Recommendations and Limitations. o Summary: brief outline of the task and advises of the recommendation. o Methodology: must explain and justify the methodology employed. o Recommendations: recommend a preferred option. In addition, includes analysis on the sensitivity of the decision to the discount rate (e.g. try between 5% and 15%). o Limitations: must identify key limitations with the analysis (recommend additional analysis to alleviate these limitations where appropriate)EFB210: FINANCE 1, Semester 1 2019  Capital Budgeting Report and Analysis  ___________________________________________________________________________________  General Information  Marks:  25  Weight:  25%  Format:  Report and Analysis  Due:  12 May 2019 (end of day, 11:59pm)  Submission:  Submit report and Excel analysis files by uploading your files to the Finance 1  Assignment portal in Blackboard. Note that when saving and submitting the report  and analysis files, please ensure that:  - You upload the correct files and that the files are not corrupted in any way. As  markers, we can only mark what is provided to us at the time of submission. - Each filename must include your name and student number, and the file  extensions must be either .docx (report) or .xlsx (analysis). o For example, if Jon Snow was studying Finance 1, he would save his  report and analysis as:    Jon Snow 1234567 Report.docx    Jon Snow 1234567 Analysis.xlsx o Please note that file types that cannot be opened in Word or Excel, e.g.  numbers files, are not accepted. o Part of the assignment’s CRA relates to correct filenames.  __________________________________________________________________________________ Background information:  Deep Pocket Fund (DPF) has a solar energy project under evaluation. The initial investment of this  project includes land purchase and a solar energy generating system. Deep Pocket Fund has no plan to  operate it forever. Their strategy is to set up the energy plant and sell the energy to the spot market as  a long-term project. As a financial analyst of DPF, your manager asked you to evaluate the project,  and offer advice on which solar system they should adopt. The detailed information is as below:  1. Project life is 30 years.   2. Land cost $5 million. The land is expected to appreciate by 1.5% per year over 30 years.  Assume your cost of land is a fair market value and you are expected to sell the land at fair  market value by the end of 30 years.  3. You have a choice of choosing fixed solar panels or rotating solar panel systems. 1 MWh  (1000 kW per hour) system of rotating panel systems costs $1.3 million.  Your purchased land  allows you to build a 25MWh system. A rotating solar system is more efficient in producing  solar energy with an average output of 5.6 hours per day. The maintenance cost is about 10%  of the sales revenue.  4. If you use fixed solar panel systems. 1MWh (1000 kW per hour) system costs $1.1 million.  You can build a 30MWh system as the fixed systems require less space. However, the  effective output from the average daily sunshine is about 4.5 hours. The maintenance cost is  about 8% of the sales revenue.  5. You can sell your electricity to the spot market at price of $80 per MWh in the first three  years and then the price will increase by $2 every three years. You will also get a government  bonus of $70 per MWh (e.g, Large-Scale Generation Certificate) for the first 5 years.  6. After 30 years, it will cost you $50,000 to dump all equipment and clean the site.  7. Additional assumptions:   - The discount rate for the project is 9%.   - The tax rate is constant at 30%. Capital gains tax is 15% for land sales after 30  years (50% discount of the normal tax rate).  - Straight line depreciation of solar systems with zero salvage.   - 365 days per year.  - Both systems will lose 0.75% efficiency per year. Image source: https://www.renewwisconsin.org/solarfarms/ Task  The management of Deep Pocket Fund have requested that you provide a detailed financial analysis  of each option and prepare a report that recommends a preferred option. The following requests have  been made about the analysis and report:  - The financial analysis is to be completed in Excel. The file is to be easily adjustable for different  scenarios and all inputs must be in the one sheet called ‘Assumptions’. The analysis of each solar  system type must be on a separate sheet.  - The report is to be short (600 words + 20% tolerance) and written in a manner that can be  understood by a person with a basic understanding of financial analytical tools.  - The report sections include: Summary, Methodology, Recommendations and Limitations.  o Summary: brief outline of the task and advises of the recommendation.  o Methodology: must explain and justify the methodology employed.  o Recommendations: recommend a preferred option. In addition, includes analysis on the  sensitivity of the decision to the discount rate (e.g. try between 5% and 15%).  o Limitations: must identify key limitations with the analysis (recommend additional analysis to  alleviate these limitations where appropriate) - Disclaimer: While information collected is to provide a realistic setting, this case study is for educative purposes  only and should not be used for any other purpose. All mistakes are those of the author and not QUT.    EFB210 Finance 1 (Sem. 1, 2019)  Assignment Criteria Sheet, Report (25%) 	Student Name: _______________________________________						Student No: ______________________ 	Criteria 	7 	6 	5 	4

Sweta · Accepted Answer

Assumptions
	Key inputs
	Project life	30
	Land cost	$   5,000,000
	Land appreciation rate per annum	1.50%
	Sale price per MWh	80
	Price increase per 3 years	2
	First 5 year gov bonus per MWh	70
	Cleaning cost in year 30	$   50,000
	Discount rate	9%
	Tax	30%
	Discounted capital gain tax	15%
	Days per year	365
	Efficiency lose yearly	0.75%	per annual
	Solar System
	Rotating system
	Installation cost per MWh	$   1,300,000
	Total installed capacity	25	MWh
	Effective hours per day	5.6
	Maintenance cost percentage of sales	10%
	depreciation	straight line zero salvage
	Fix system
	Installation cost per MWh	1100000
	Total installed capacity	30	MWh
	Effective hours per day	4.5
	Maintenance cost percentage of sales	8%
	depreciation	straight line zero salvage
Analysis rotating system
				Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10	Year 11	Year 12	Year 13	Year 14	Year 15	Year 16	Year 17	Year 18	Year 19	Year 20	Year 21	Year 22	Year 23	Year 24	Year 25	Year 26	Year 27	Year 28	Year 29	Year 30	Total
	Production per year MWH			51,100	50,717	50,336	49,959	49,584	49,212	48,843	48,477	48,113	47,752	47,394	47,039	46,686	46,336	45,988	45,643	45,301	44,961	44,624	44,289	43,957	43,628	43,300	42,976	42,653	42,333	42,016	41,701	41,388	41,078	1,377,388
	Revenue per MWH			150	150	150	152	152	82	84	84	84	86	86	86	88	88	88	90	90	90	92	92	92	94	94	94	96	96	96	98	98	98
	Total Revenue			7,665,000	7,607,513	7,550,456	7,593,745	7,536,792	4,035,407	4,102,828	4,072,056	4,041,516	4,106,710	4,075,909	4,045,340	4,108,372	4,077,559	4,046,977	4,107,912	4,077,103	4,046,524	4,105,424	4,074,633	4,044,073	4,100,998	4,070,241	4,039,714	4,094,723	4,064,012	4,033,532	4,086,682	4,056,032	4,025,612	139,693,398
	Maintenance Cost			766,500	760,751	755,046	759,375	753,679	403,541	410,283	407,206	404,152	410,671	407,591	404,534	410,837	407,756	404,698	410,791	407,710	404,652	410,542	407,463	404,407	410,100	407,024	403,971	409,472	406,401	403,353	408,668	405,603	402,561	13,969,340
	Depreciation			1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	1,083,333	32,500,000
	Profits			5,815,167	5,763,428	5,712,077	5,751,038	5,699,780	2,548,533	2,609,212	2,581,518	2,554,031	2,612,705	2,584,985	2,557,473	2,614,201	2,586,470	2,558,946	2,613,788	2,586,059	2,558,539	2,611,548	2,583,837	2,556,333	2,607,565	2,579,883	2,552,409	2,601,917	2,574,278	2,546,846	2,594,681	2,567,096	2,539,718	93,224,058
	Tax @30%			1,744,550	1,729,028	1,713,

The management of Deep Pocket Fund have requested that you provide a detailed financial analysis of each option and prepare a report that recommends a preferred option. The following requests have...

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