Case of the Proposed Jiminy Peak Wind Turbine Essay
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1. 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… Not only is the wind turbine environmentally sustainable, it can lead to tremendous cost savings for the resort. Below are the advantages (3):
• The turbine is able to generate energy 24 hours a day, 7 days a week. While the resort may not use all of the electricity that the turbine generates, the excess electricity can be diverted to the power grid and sold resulting in additional money for the resort (approximately $161,000/year).
• With a wind turbine, Jiminy Peak Mountain Resort will buy 2.3 million fewer kWh per year resulting in cost savings for the resort.
• The resort will benefit from renewable energy production tax credits for 10 years.
• The wind turbine eliminates the need for diesel fuel generated power.
• The wind turbine eliminates gases such as CO2, SOx and NOx.
• The turbine does not produce much sound at 200 yards away, only that equivalent to a quiet whisper.
3. While the wind turbine can be advantageous to Jiminy Peak Mountain Resort, the resort must also consider the disadvantages of erecting the turbine prior to making a final decision (4).
• The wind turbine is taller than the Statue of Liberty and its blades are more than 100 feet wide. Local residents may not want such a tall structure at the top of the mountain.
• The construction materials for the wind turbine would travel noisily through the local community which would add to the road