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While I could lose on this particular investment, if I made this investment several times, I would come out ahead with a 146.5% payoff.
It should be noted that a key step in this process is to evaluate the quality of the estimates. The expected value of future cash flows is only as valuable at the information that goes into deriving them. It is a situation of garbage in, garbage out. In this case, the different weightings came from one analyst, who based his decisions on OPEC's informational output. OPEC may have been attempting to obfuscate its future policy direction in order to ward off oil speculators, or the analyst may have misinterpreted OPEC's communiques. In either case, it would have been advisable to gather information from more analysts before making the weightings.
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For example, if the up-front costs are known, that provides a starting point for a net present value analysis. In this case, we do not have any way of deriving a cost of capital nor do we have a clear sense of the future cash flows. So we cannot accurate use a capital budgeting model or subject it to a sensitivity analysis.
We therefore need to make the best use of the information available to make this decision. The most appropriate model then is the weighted average of expected future cash flows. That model gives us an expected return of 146.5%. All other factors being equal, that is a signal that I should invest in wind power. The amount of the investment will depend on my own level of wealth, as the expected return is the…
Wind Power The greatest challenge of the 21st century is filling the gap between energy demand and supply with clean, reliable and green source of energy. Energy is very essential and it is in material form in everything that is around us. The opportunity cost of obtaining the energy that we require is the impact that is made on our environment. Some energy sources have greater impacts while others have relatively
The production of electricity from power plants relying on this varying resource changes considerably. On the other hand the electricity demand does not cope with such variations. (Komor, 2009) • Other forms of barriers: There are some other obstacles like allowing challenges of renewable power plants and technical hazards with regard to transmission connecting to the plant, higher proportion of capital to operating costs and policy instability. (Komor, 2009) The prime
Wind Energy Advantages of Wind Energy The exploitation of nonrenewable energy sources by the global population, notably by modern technological societies, has contributed to hostile political, economical, and environmental climates. The most notable nonrenewable energy sources, fossil fuels, which includes the burning of coal, petroleum, and natural gas, has induced concern of global warming, soaring oil prices, national energy security, and is depriving the earth of natural resources (Conner 130). Knowing the
Wind Farms in Canada [insert Subject/subject Code] How Will the Use of Wind Farms Benefit Canada? In Canada, the development of helpful energy saving concepts is in debate, because of the issues present in the economy. The primary goal of this proposal is to focus on the benefits of the use of wind farms for Canada. This is a business proposal, related to the researcher's business degree, discussing how the business of creating
Wind Farms in Canada As pollution and global warming threaten our environment, wind farms represent a particularly sustainable response via the creation of energy from wind. In Canada, the wind farms are becoming more and more popular and a question is, at this stage, being posed relative to the means in which these farms generate benefits and costs. Specifically, the question is whether the benefits of constructing such a farm outweigh its
(Kleekamp, 2005) The agreement between all the countries at Kyoto had clearly specified that all countries were to cut down on their release of heat trapping gases by 5.2% from the levels that they had reached in 1990 by the period of 2008 to 2012. This is also subject to the condition that Australia and United States did not approve of the protocol through approval by their democratic authorities and