Investment in solar energy projects-paper代写

下面为大家整理的一篇优秀paper范文- Investment in solar energy projects，供大家参考学习，这篇论文讨论了太阳能项目的投资。太阳能作为一种可再生的清洁能源，具有非常重要的战略意义，所以对太阳能项目的投资要重视起来。而评定投资价值的话，就要对项目的价值进行评估，估算它的成本和收益之间的关系。

Solar energy as a renewable clean energy, which is the key development of the world, has a very important strategic significance to China. And solar power generation as the key of the development and utilization of solar energy, the industry is developing rapidly, and the technology is becoming more and more mature. With the development of society, the demand of energy will continue to grow, the fossil resources in our country have become increasingly scarce, and the ecological environment problems caused by the over exploitation of energy have become increasingly prominent.

Solar power generation, because of its unique renewable, in the production of energy at the same time, few consumption of other resources and energy, protect the ecological environment, improve the power structure, and promote the sustainable development of the national economy, to create a harmonious society has played a positive role in promoting, which caused the majority of enterprises and individuals to invest in interest.

As the most important equipment in the solar power plant, the quality of power station, power generation, yield, value are closely related with the components. Components mainly by the battery, packaging material, back, glass, border, junction box, etc., which, the battery chip is the core of the key components, external packaging materials are in order to protect its normal and stable operation. In these critical protection materials, the most important quality of the back of the back, once the back of the failure, which the packaging material, battery chip will be as if the loss of shelter and protection of flowers in general with the environment.

The western region is rich in resources, light, low land prices, has become a large-scale photovoltaic power plant construction of the ideal place for. But in these areas, there are also some of the more severe natural conditions, such as drought, severe desertification, strong wind and sand movement. With the extension of the outdoor use time of PV modules, sand wear will continue to reduce the thickness of the surface layer material, which requires the developer to choose the back surface layer, must have a strong wear resistance.

At present, more and more component quality problems are related to the selection of the back plate. The mainstream of the market is generally divided into PET FEVE, PVDF film, PVF film back several. Among them, pet backplane is widely used in Japan, the outer layer of protective material PET polyester is non fluorinated materials, non-fluorine materials durability is poor, direct exposure to outdoors in the polymer chain segment easily damaging UV rays, cracking phenomenon. This situation is not accidental. In recent years, due to the time limit for the project and cost control factors, the quality of some solar power station has to be time to test.

With the passage of time, the quality of the component is likely to occur frequently, the ultimate impact on the sustainable development of the solar industry. The long-term stable operation of photovoltaic power plant, to reach the useful life, the internal rate of return and the net present value of the investment income of the power plant project are obvious.

Key financial tool analysis

There are three main quantitative assessment tool, which is used to help assess and cost-benefit analysis of the different options rank: net present value (NPV), benefit-cost ratio (BCR) analysis and internal rate of return (IRR).

Each measure is the total costs and benefits of a project as the foundation, and the cost of each project and the costs and benefits to the future.There are three main quantitative evaluation tools used to help evaluate and select different levels of investment plans: net present value (NPV), benefit cost ratio (BCR) and internal rate of return (IRR) analysis. Each analysis tool is an investment project analysis of the costs and benefits of the foundation, as well as the cost of each project and future costs and benefits. When an analysis tool shows that the investment can get a certain income, then the three analysis tools are likely to get different conclusions.

The net present value

Net present value (NPV) measures the net benefit of present value.It was calculatedas the present value minus all the capital and the regular cost (including externalities) during the evaluation period of the present value of the project.

Using the appropriate discount rate in this guide is discussed in the present value of the discount.

Net present value as a quantitative evaluation tool:

Choose according to their size and grade;And/or

To accept or reject.

The calculating formula of net present value:

(Brealey& Myers, 1996)

If the Net present value greater than zero, means that the estimated total revenue more than the total cost of the application of the discount rate.

If the selected reflect the opportunity cost of capital discount rate economic evaluation for the powerful, so a positive net present value usually demonstrate the effectiveness of the program or policy. Who have more than one option, have the highest net present value of the option is usually the most effective.

Net present value method is the most commonly used quantitative evaluation tool .In the general case, the NPV method to provide fair, because the project benefits to the choice of a discount rate rather than any definite mathematics rate.

Benefit-Cost Ratio

Cost benefit analysis is a method to evaluate the value of the project by comparing the total cost and benefit of the project. The cost-benefit analysis is a kind of economic decision-making method, and the cost analysis method is applied to the decision making of obtain the maximum benefits for the investment decision. In this method, all costs and benefits of a project or decision will be listed and quantified by one. Due to the practical problems in the aspects of technology and economy of many parameters are often uncertain. Therefore, it is necessary to make the various hypotheses for these parameters, their influences on engineering system cost effectiveness is tested by analyzing, and weigh the pros and cons, select the favorable scheme.

It is the most common method for The benefit cost ratio (BCR) because it represents the present value, and all the income value is divided by the present value of all the costs. BCR greater than 1 means that a net present value for the project also means that the project can be invested. However, due to the inherent bias in simple BCR formula technology, appropriate BCR formula when using estimation and maximize the recovery is the purpose of capital scarcity is the following:

(Brealey& Myers, 1996)

BCR result should be reported With NPV, but is not recommended as the only quantitative assessment tool for decision-making, because it is biased in favour of the project early returns and small projects. Therefore, incorrect ranking may occur, which may result in the selection of a low efficiency project, especially when they are mutually exclusive. However, when BCR is a convenient quantitative evaluation tool, there are many investment proposals and resources are limited. The results of BCR should be taken into consideration with NPV results in the decision making process.

Internal rate of return

The expected costs and benefits of the net present value of zero for the internal rate of return (IRR) discount rate. IRR does not the preferred DTF quantitative evaluation tool as it produces irregular results:

There is no discount rate, which will generate a net present value of zero;

There are more than one IRR;

There is biased in favour of small projects and projects early returns may not be consistent with the project's NPV ranking.

The economic implication of the internal rate of return: in the whole life period of the project, according to interest rate= IRR, if there is a failure to recover the investment, and at the end of the life, the investment is completely recovered. That is to say, the project is always in the condition of the investment that has not been recovered in the life of the project. Therefore, the project's solvency depends entirely on the project, so there is an internal rate of return. In general, the IRR and the reference chart to decide whether a project should continue. IRR also cross project to determine their performances.

IRR's formula:

(Brealey&Myers, 1996)

Some assumption for investment project

As their formula tool above have some factors to get BCR analysis as following

Capital

Cost analysis in solar power plant has two kinds of cost which are the fix cost and variable cost. In this case, fix cost means investment cost which should involve some equipment and land. Meanwhile, the variable cost in solar plant is the operating cost.

Fix cost-Investment Cost

Land

Construction

Purchasing of Solar Panel

Solar Machine Cost

Variable cost-Operating Cost

Employee

Coarse Battery

Maintenance of Solar Facility

Basic Understanding for Solar Power Plant

Solar Power Plant is following the current technology situation

Business cycle is 10 years

Initial investment, the cost of the investment will be switched to a straight line (which provides a much higher depreciation) by using the double-declining asset depreciation method. Therefore, the residual value of the machine and the solar building ten years later is zero

The business has six employee and one business manager

Discount rate is 7%

Estimate benefit for project

The benefit of solar energy is that the number of electrons in the monthly sales volume of 80000 MW. The year revenueis about 960000 MW per year (revenue from solar energy production in 2015). At the same time, it assumes that the annual revenue growth of 4%.

Year       Income

1     960000

2     998400

3     1038336

4     1079869.44

5     1123064.22

6     1167986.79

7     1214706.26

8     1263294.51

9     1313826.29

10   1366379.34

Estimated cost of the project

Solar power plant production costs or expenses are divided into two kinds of cost (fixed cost) and operating costs (variable costs) have been detailed follow-up

Fixed cost-Investment Cost

Cost of purchasing solar panels

Solar panels cost 30000 megawatts of solar panels. This plant has 20 solar panels of about 600000 MW.

Project cost (conversion process plant)

This plantfor construction cost is about 70000 mw.

Land value

To make solar power plant, the land value is 100000 MW.

Solar machine cost

The production cost of solar power equipment is 30000 MW.

Summary of Investment Cost

List  Fix cost(MW)

Purchasing Cost of Solar Panel       600000

Construction Cost (Transformation Process Plant)      70000

Land Value    100000

Solar Power Machine cost 30000

Total       800000

Variable costs-Operating cost

Rough battery: the cost of a rough battery is about 1000per month which is 120,000 per year.

Staff: using 6 employees per month 4500 this means that 54000 per year.

Marketing: the use of marketing channels of distribution costs about 201,600 MW per year.

Maintenance: maintenance cost is 5000 per month and it is about 60000 per year.

Water and electricity for monthly payment of about 2500 MW, is 30000 per year

Petrol: solar panels use oil transportation 300 MW every day. Think every year is about 109,500.

List  Variable Cost

Rough battery      120000

Marketing      201600

Maintenance 60000

Bill   30000

Staff       54000

Pastol     109500

Total       575100

Assume the operating cost for solar plant increase 2 per sent every year. Because of the price of employee rise, but other operating cost according not increase or little show at table

The financial tool analysis of project

NPV analysis for this project

(Brealey& Myers, 1996)

The NPV for this project isNPV(7%, 384900, 411798, 440001.96, 469568.45, 500557.49, 533029.92, 567050.25, 602685.38, 640004.98, 679081.6) - 800000=2,746,104.98

Because of the NPV use discount rate is 7%, which has the value 2,746,104.98is more than 0. As a result, it means the value of these project has worthy invest it

IRR analysis for this project

(Brealey& Myers, 1996)

According to calculating formula, the IRR is 52%. Since compare with discount rate is 7%, it found that the IRR rate is higher than interest rate which means these investment project is suit for investors.

B/C ratio analysis for this project

Based on the calculating formula, the benefit cost ratio is

(Brealey& Myers, 1996)

B/C ratio =NPV(7%,960000,998400, 1038336, 1079869.44, 1123064.22, 1167986.79,1214706.26, 1263294.51, 1313826.29, 1366379.34)/NPV(7%,575100, 586602, 598334.04, 610300.7208, 622506.7352, 634956.8699, 647656.0073, 660609.1275, 673821.31, 687297.736)+800000=7,920,603.70/5,174,498.72=1.5307 more than 1which means the benefit for this investment is higher than cost.

Mutually exclusive projects

Mutually exclusive projects are for a project acceptance, exclude other investment projects in such cases, the best project is accepted. The NPV and IRR conflict, sometimes in the case of mutually exclusive projects appear, become the key factor. Due to the net present value is an absolute measure, it will add more high value of the dollar's original investment required. Internal rate of return is a relative measure, which will provide the best return on investment higher added value of the total project(Horngren, 2014).

Why the NPV and IRR ranking mutually exclusive projects provided different answers in the third part is given. This part will discuss where to go, IRR and NPV method to produce different answers. Relative to the internal rate of return, net present value method has many advantages. First, when calculate a portfolio includes multiple net present value of the project, it need only and each project's net present value directly. However, the internal rate of return of an investment project is difficult to calculate, because or a single project IRR does not represent the average amount of project investment internal rate of return (Frino, 2013).

Second, there is only one result for project's net present value. Therefore, according to the net present value, the enterprise can easily decide to accept or reject the project. It is to decide investment decision but the project's IRR could make the company's confusion and difficult to determine the internal rate of return for the company should be compared with the company's required return on (Lohmann, 1993).

Advantages and disadvantages comparison

Net present value method is theoretically sound because it has a realistic reinvestment assumption. It takes into account the cost of capital, and provides the value estimate, it is easier to understand.

The net present value analysis are very important for the characteristic of it is the upper and lower limits to reduce the discount rate that the ability of different level of risk of the project.

However, the net present value depends on the size of the project. If not careful analysis, investors can choose to ignore the fact that many of the smaller net presentvalue of this project can accomplish the same investment, which leads to a higher total net present value. It requires careful analysis of capital rationing.

Internal rate of return do not influenced by the size of the project. Internal rate of return is also very easy to calculate, because it does not need to estimate the cost of capital or obstacles. It only needs to be the initial investment and cash flow. However, the same facilities will also be a disadvantage, if the project is to accept not to compare the cost of capital.

However, internal rate of return of reinvestment assumption is not realistic, may lead to inaccurate project rankings. Another serious drawback is that many problems of internal rate of return. In unusual cases, cash flow, in a negative cash flow of the project, IRR with multiple values.

Conclusion

Financial cost benefit analysis of this solar power plants to collect data of financial from some enterpriser in China. By using three financial tools analysis as follow: NPV, IRR, B/C ratio.

Summary of analysis result as follow

NPV use discount rate 7% has value 2,746,104.98 more than 0 means that the value of the project has worthwhile benefit.

IRR has value 52% that compare with interest of loan 7%, it shows the IRR is higher than interest rate which means the investment project is more suit for investors.

B/C ratio is 1.5307 more than 1which means the benefit for this investment is higher than cost.

According to these financial analysis tools, it is improved in the capital budgeting approach, net present value and internal rate of return on investment decisions of the two major tools. However, we find that when NPV and IRR are mutually exclusive, the latter is a serious defect, rather than a reliable indicator of the value of the project, and cannot be used as a basis for decision making. There are a lot of investment decisions; the cash flowcan be predicted to a considerable degree of certainty. But even if there is an accurate and reliable estimate of the cash proceeds, often make the wrong decision, because the incorrect method is used to evaluate the information. Although it is not possible to make an estimate of the cash income, it will happen, but it does not mean that the error analysis method is reasonable. When all the calculations are done, the judgment may be included in the analysis to decide whether to accept or reject this investment project.

References List

Frino, A. (2013), Introduction to corporate finance, 5th ed., Pearson Education Australia, Sydney.

HorngrenT. (2014), COST ACCOUNTING, 14th ed., Pearson Education Australia, Sydney.

Lohmann, R. (1993), ‘The IRR, NPV, and payback period and their relative performance in common capital budgeting decision procedures for dealing with risk’, The Engineering Economist, vol. 39, no.1, pp. 17, viewed 13 October 2014, ProQuest Central.

Brealey, R., & Myers, S. (1996). Principles of corporate finance.New York: McGraw-Hill.

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