Consider the basic facts about a possible renewable energy project that your team's diversified energy company is considering as an investment and complete the following:
- Calculate the project's cash flows, NPV, and IRR in a spreadsheet model.
- Calculate the cost of capital for the project.
- Prepare a cash flow statement for the project using the "direct" method.
- Categorize the diversified energy company's assets into different risk categories.
- Estimate a cost of capital or each category of assets.
- Justify whether this renewable energy project should be undertaken.
- Knowing that both accounting net income and cash flow are critical financial components of a business, why are they both critical?