The time the turbines begin operatio is referred as time 0, and the costs for the previous 4 years is 5227 $. After year 20 it is expected to no longer be profitable to operate the turbines, therefore they must be removed at an extra cost of 500$. The cost of operating the turbines is 800 from year 1-20. The electricity production per year is 2000000 MWh. All cash flows are atributable to the end of tuecyears and the discount rate is 10% per year.
1. if the electricity price is assumed to be constant over the 20 years what should it be the minimum investment to make it profitable?
2. if the electricity price starts at 0.90 $/KWh at year 1 and drops by 5% every year, would the investment in the offshore wind farm be profitable?
3. if the life expectancy increases from 20 to 25, what should the minimum electricity price be for the investment in the offshore wind farm to be profitable?