Case of the Proposed Jiminy Peak Wind Turbine
1575 words 7 pages1. Two commonly used methods of financial analysis are payback and present value. Payback determines the length of time for an investment to return its original cost (1). Using the assumptions stated below the payback of the Jiminy Nick wind turbine with a cost of about $3.3 million would return the investment in about four years time. Net present value summarizes the initial cost of an investment, the estimated annual cash flows, and expected salvage value, taking into account the time value of money (1). A NPV calculation for the scenario SED is reviewing equals $7,697,286 minus the investment costs of $3,318,000 totaling $4,379,286.
The capital budgeting analysis reflects the assumptions stated in the case scenario that the initial …show more content…
• Finally, the construction of the wind turbine could cause turmoil amongst the community people because of conflicting views.
4. Additional positive considerations when considering the construction of the wind turbine are:
• Wind turbines take up much less space than the average power facility.
• Wind turbines are a great source of generating electricity in remote locations such as mountains.
• Wind is free.
Additional negative considerations when considering the construction of the wind turbine are:
• Because wind turbines produce less electricity than the average fossil fueled power facility, more turbines have to be built.
• Wind turbine construction is very expensive.
• Surrounding wildlife must be considered.
• Unreliability is a major issue. If there is no wind, there is no power production.
5. When considering multimillion dollar purchases at most companies executive management and even board approval is often required. The memo below is addressed to Brian Fairbank the President of the resort.
To: Brian Fairbank, President and CEO of Jiminy Peak Mountain Resort
From: Sustainable Energy Developments, Inc.
Subject: Wind Turbine Project Feasibility Study
Since last year, electricity costs have increased from $.11/kilowatt hour to $.16/kilowatt hour. Although Jiminy Peak Mountain Resort