Thursday, June 7, 2012
Capital Budgeting and Taxes
Tax credits on renewable-energy are set to expire beginning at the end of
2012, which will likely reduce capital investments in these projects.
In fact, one analyst notes that wind projects have already slowed down
since a project begun now could not be completed by the end of the year
and capture the tax break. Obviously, the tax credits are an important
cash flow to these renewable-energy projects. The article also states
that before the recession, solar facilities earned a 6 to 8 percent
aftertax IRR, while the current aftertax IRR is more than 10 percent. A
question: Since the article states an aftertax IRR, is this any
different than the IRR calculated in the textbook? http://www3.cfo.com/article/2012/6/tax_renewable-energy-wind-solar-investment-tax-credit-production-tax-credit?currpage=1