Sonnedix Solar Solutions: An Earnings and Cash Flow Conundrum Case Study Analysis
Prepare a pitch deck with your recommendation for the investment in this solar plant. If you recommend the investment, please analyse how delaying (i.e. construction starts at theBeginning of May) can benefit or not. If you do not recommend the investment, please include in your analysis what decisions you could make to make this a profitable investment.
Recommendation
On the basis of DCF valuation conducted, thecompany is recommended to pursue the implementation of the solar plant. The implementation could be viewed in two different scenarios including the construction cost incurring at the beginning of the project and in beginning of May. Although NPV for both of the scenarios is positive showing the feasibility of the project under both scenarios but the company is recommended to pursue the construction cost incurring in May option.
On the basis of DCF valuation, company should invest in this 6MW project as its NPV is positive in both the scenarios, which shows that it is profitable for the company and increases the customer base.
Another valuation is conducted which is DCF valuation (modified), (see the excel sheet). On the basis of this, the IRR of the company is increasing from 373% to 2245%, which shows that the company should start construction at the beginning of May. The construction costs are incurred in May..........................
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