Internet Exercises

www: IE14-37 Investing in Wind Power Besides being an environmentally appealing alternative to other methods of generating electrical power, wind turbines can be profitable. The Danish Wind Turbine Manufacturers Association maintains a web site at www.windpower.org that allows you to compute the net present value of investments in wind-powered turbines.

1.      Verify the net present value calculation for the default data that already appear on the screen.

2.      Change the real interest rate (i.e., discount rate0 to 12%. What happens to the net present value of the wind turbine? What happens to the real rate of return (i.e., the internal rate of return?)

3.      Keep the real interest rate set at 12%. How high would the price per kWh (i.e., kilowatt-hour) for electricity have to be to make this an attractive investment?