Fuel Cell Analysis This Report Serves as

Fuel Cell Analysis This report serves as a summary and justification of the fuel cell investment that has been studied and analyzed over the recent months and years. The executives of Acme Incorporated will find within this report that their investment in this initiative will not be for naught and that it will become quite profitable very quickly.

The analysis will include a year-by-year breakdown that will account for the cost of the energy to be sold, the revenue from the sold energy, the fixed costs that must be paid, the total depreciation by year, the income taxes by year and the overall profit and loss by hear. Highlights A loss will be incurred the first year, but only to the tune of half a million Losses will continue until about year six.

First profit should be in year 7 and will be about $121,000 Profit will break a million in a single year by year Profits should grow about $100,000-200,000 thereafter Total amount lost/gained over fifteen years will be more than four million Break-even point will occur in year 12 Fixed costs are $450,000 a year Depreciation per year will range from $66,000 to $173,000 Depreciation will be highest in the first few years Income tax rate is 25% a year Tax credit in first year of 30% is worth $112,500 System fully online by year 4 Losses of about $2 million in first year but will fall sharply after that Analysis What follows in this section is an item-by-item analysis of the data points in the included data sheet.

That analysis is as follows: Activation of System System will come online twenty-five percent at a time over the first four years. System completely online the fourth year. 7.5 million kilowatt hours the first year, 15 million the second year, 22.5 million the third year and 30 million every year thereafter.

Cost of Energy Sold Cost of energy starts at six cents per kilowatt hour but will fall ten percent with each passing year Over fifteen years, this means the rate will fall from six cents a kilowatt hour to about 1.37 cents per kilowatt hour Revenue from Energy Sold Over the same time period, the revenue per kilowatt hour will start at five cents per kilowatt hour With each passing year, that rate will rise five percent per year Over fifteen years, this means the rate will rise from five cents to about 9.9 cents.

Expenses Admin costs are $200,000 a year. This is a fixed cost. Maintenance costs are $175,000 a year. This is a fixed cost. Non-electric utilities are $45,000 a year. Insurance is $30,000 a year…both fixed Depreciation Depreciation varies based on year due to different rates and the fact that there are three cash infusions. One is at the onset, one is at five years and the other at ten years. Depreciation starts rather high ($93,750) and gets as high as $149k.

Falls below $100k a year in year 8 and never goes back above $100k except for year 11 ($102k) Revenue Due to phased activation of system, revenue is only $375,000 in first year. Doubles to $787,500 in second year due to doubling of capacity. Rises to $1.2 million in year three due to another 25% going online and the first year with full capacity gets revenue of $1.7 million. Revenue grows about $100,000 a year thereafter. Profit/Loss per Year and Over Time About $2.5 million in losses will be sustained before profit is gained.

Based on an investment of $3 million, perhaps a bigger "cushion" would be a good idea since the current margin of error is only about half a million.

Break-even point occurs in year 12 Grand Totals Over the entire fifteen year window, here are the grand totals of relevant figures 405,000 kilowatt hours produced $11.74 million in total cost of energy sold $3 million in admin costs $2.625 in maintenance costs $675,000 in non-electric utilities $450,000 in Insurance/Backup $1.545 million in depreciation $30.042 million in total revenue $7.510 million in income tax $4.143 million in net profit after taxes Conclusion In the end, the author of this report would offer the following: It would be perhaps wise to have a little more operating capital for this project in case there are project overruns.

The current projected margin for error is about $500,000 due to the losses.