Internet Exercise #1
Besides being an environmentally appealing alternative to other methods of generating electrical power, wind turbines can be profitable. The Danish Wind Industry Association maintains a web site at http://www.windpower.org/en/ that allows potential customers to compute the net present value of investments in wind-powered turbines. Click on the Know How button at the top of the home page, then on the Guided Tour link, then on the Economics link, and finally on the Economics Calculator link.

Perform the following and then write a brief paper (5 paragraphs) that summarizes your findings.

• Review the net present value calculation for the default data that already appears on the screen. What discount rate is being used in this present value calculation? Verify the net present value calculation for the default data that already appears on the screen. (Show your calculations in your paper.)


• What is the internal rate of return inherent in this default data project?


• Change the "real" interest rate (i.e. what we think of as the discount rate or the cost of capital) to 12%. What happens to the net present value of the wind turbine? Why did or didn't it change?


• Keep the "real" interest rate (i.e., the discount rate) at 12%. What happens to the internal rate of return? Why did or didn't it change?


• How high would the price per kWh (i.e., kilowatt hour) for electricity have to be to make this an attractive investment?

Internet Exercise #2
Perform an Internet search using the term, capital budgeting, and locate an article (less than one year old) from the results of your search. (Make sure that you do not select an instructor's lecture notes or a class assignment from the results of your search.) After reading the article, write a brief paper (3 – 5 paragraphs) that summarizes and comments on the article. (Your paper should provide the appropriate citation(s). If necessary, you may wish to refer to the following website, which includes information about citations: http://www.cod.edu/library/research/citenet.htm.)