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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...
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…
References
Different Fuel Cell Technologies U.S Department of Energy (2010) provides the description of different fuel cell technologies. The fuel cell technologies are differentiated according to their efficiency, operating temperatures, costs and application. The classifications are based on 6 major groups: Alkaline fuel cell (AFC), Phosphoric acid fuel cell (PAFC), Solid oxide fuel cell (SOFC), Molten carbonate fuel cell (MCFC), Proton exchange membrane fuel cell (PEMFC); Direct methanol fuel cell (DMFC). Alkaline fuel cell (AFC) The AFC generates electrical power
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