Monday, November 12, 2012

Notes - Fundamental of Economics

The following notes are taken from Wind Turbine Technology by Ahmad Hemami.
  • 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
    • 15 mil spent revenue of 5 mil for 5 years interest rate 10% compounded anually
Profit must be greater than 15 million
Will not pay back in 5 years

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