Jamaica Macaroni Factory: Capital Budgeting for Renewable Energy

Name: Jamaica Macaroni Factory: Capital Budgeting for Renewable Energy
SKU: W34511_P

Ryan Hudgins, Zach Chen

Product #:W34511_P

Supplier:Ivey

Discipline:Accounting, Sustainability

Setting:Jamaica, 2022

Details:Case (PDF) • 10 pages • 2023-11-06

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In January 2022, Nicholas Chen had to decide whether to invest in one of two solar power systems to reduce the energy cost of the manufacturing company, Jamaica Macaroni Factory Ltd.’s (JMF). He could purchase a 100kW solar power system and generate some of the energy JMF used while also selling back electricity to the grid when the factory was not operating, or he could purchase a 230kW system, which would produce more energy but, due to regulatory restrictions, would not sell electricity back to the grid.

Learning Objectives

This case is suitable for undergraduate or graduate-level students as part of either a long-term investment or capital budgeting section of a course. This case assumes a prior understanding of long-term investment decisions and capital budgeting and should not be used as an introductory case to these topics. After working through the case and assignment questions, students will be able to do the following

Evaluate an investment opportunity from a qualitative standpoint.
Forecast net operating cash flows for a potential investment while incorporating both currency conversion and tax savings from depreciation.
Analyze a potential long-term investment opportunity by (a) calculating NPV, internal rate of return (IRR), and payback and (b) by performing a sensitivity analysis.