Arrow Wind Farms

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Table of Contents
Introduction3
Status of the Company3
Risks of a Growing Business4
Acquiring Debt for Expansion4
Conclusion5
References6
Introduction
The Arrow Wind Farms, with its chief financial officer Dustin Hardaway, is planning an expansion to nearby states. This company is producing an alternative energy source, which is from the wind to provide energy for the consumers, and this is really beneficial for the conservation of energy. Wind energy involves the use of moving air force using it to power generators and wind turbines. The equipment involved includes a generator, power conditioning equipment, gearbox, control equipment, etc. The operation of the turbines is highly dependent on the wind’s force and duration. The maintenance and operation costs of wind power farms have a tendency to increase greatly throughout the 20 to 25-year lifespan of the units. The current finances to assets of the company are 70% equity and 30% debt. Here I will present some facts and ideas regarding the optimal cost of capital for the current state of Arrow Winds Farms.
Status of the Company
The company is currently in its recovery stage from the losses during the first three years and then they broke even two years ago, emphasizing the youth of the company. Small profits are starting to be generated while also managing the other aspects of running the Arrow Wind Farms. However, the fixed costs of the equipment needed in running the business are high, greatly affecting the capital needed to run and maintain the business, while decreasing the revenue. The recession that all the businesses and the economy are experiencing is not a very good move for businesses to take risky decisions in financial aspects of the business, especially for those who are still young on the market and have not yet established the strength that the company has (Murphy, 2018). While still strengthening this location of Arrow Wind Farms, opening another branch to expand the business might greatly affect the financial status of the operation in the first wind farm
Risks of a Growing Business
The beta representing the volatility of the company is also high, indicating that during this time when the economy is not doing very well, there is a huge tendency for Arrow Wind Farms to be affected by it. If an additional risk of adding debt, increasing our debt-equity ratio will be done, there is no guarantee that there will be enough profit and revenue for paying off the costs for the expansion and operation of the business. Although it seems like a good time due to the low-interest rate during these moments, the operation of Arrow Wind Farms does not yet have a clear estim...