Cost of capital in a wind generated electricity project : an alternative approach of estimating cost of capital

2011

Masteroppgave i økonomi og administrasjon - Universitetet i Agder 2011 The main purpose of this thesis is to give both a traditional and a new way of estimating the required return on equity and the cost of capital for a wind generated electricity project. The computations are based on the CAPM and the new three factor model by Long Chen, Lu Zhang and Robert Novy-Marx. The CAPM model’s estimation of cost of equity is 12.5% after tax. Further, the estimations extend to estimating the cost of debt of 5.7%. The project financed by 50% equity and 50% debt yields an after tax WACC of 8.25%. The CAPM model’s estimations is a result of a Norwegian risk free rate, market return on an international …