Notes - Fundamental of Economics

The following notes are taken from Wind Turbine Technology by Ahmad Hemami.
Introduction

• all wind turbine installation comes with
• initial cost
• purchase and installation
• operating cost
• operation and maintenance

Fundamentals of Economics

• Future value of money Present value of money
• differences in value due to time because of cost of capital/discount rate
• return rate of investors on their money
• Mechanisms for business
• loans/interest
• wind farm must become profitable for investor money to be secured
• Net Present Value
• revenue minus money invested in cost
• calculated with compound interest, typical interest style used in banks
• Example
• 8 percent interest rate every 6 months determine value of 15 million dollars after 5 years

15mil x 0.04¹⁰

22,203,664

• 15 mil spent revenue of 5 mil for 5 years interest rate 10% compounded anually

Profit must be greater than 15 million

5mil[1/(1+0.10)⁸+1/(1+0.10)⁷ +1/(1+0.10)⁶+1/(1+0.10)⁵+1/(1+0.10)⁴]
14,240,371
Will not pay back in 5 years

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