Marks: 25
Weight: 25%
Format: Report and Analysis
Due: 8 October 2023 (end of day, 11:59pm)
Submission: Submit report and Excel analysis files by uploading your files to the EFB210
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 Brad Pitt was studying EFB210, he would save his report
and analysis as:
▪ Brad Pitt 1234567 Report.docx
▪ Brad Pitt 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 rubric relates to correct filenames.
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Background information:
AAA Investment Fund has a solar energy project under evaluation. The initial investment of this project
includes land purchase and a solar energy generating system. AAA Investment 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 AAA Investment Fund, your manager asked you to evaluate
the project, and offer advice on which solar panel system they should adopt. The detailed information
is as below:
1. Project life is 25 years.
2. Land cost $6 million. The land is expected to appreciate by 2% per year over 25 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 25 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 $1.45 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 $1.2 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 $100 per MWh in the first three years
and then the price will increase by $4 every three years. You will also get a government bonus
of $80 per MWh (e.g, Large-Scale Generation Certificate) for the first 5 years.
6. After 25 years, it will cost you $60,000 to clean the site.
7. Additional assumptions:
- The discount rate for the project is 10%.
- The tax rate is constant at 30%. Capital gains tax is 15% for land sales after 25
years (50% discount of the normal tax rate).
- Straight line depreciation of solar panel system.
- 365 days per year.
- Both systems will lose 0.75% efficiency per year.
- The project requires $100,000 working capital for liquidity purpose (It will be
refunded fully by the end of project).
- Please see more details in the excel file.
Image source: https://www.renewwisconsin.org/solarfarms/
Task
The management of AAA Investment 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 ‘Inputs”. The analysis of each type of solar
panel system must be on a separate sheet.
- The report is to be short and concise (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 something between 5% and 15%).
o Limitations: must identify key limitations with the analysis (recommend additional analyses 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.