The levelised cost formulas developed in the other sheets have made the unrealistic assumption that the construction is made in exactly one year. To include the financing costs during the construction period (debt as well as equity costs) that change as the construction period changes, you can increase (or decrease) the capital cost with and adjustment. This can be done with the FV formula if you assume a flat S-curve. The manner in which you can make adjustments for the construction period are demonstrated using simple examples below. I also explain how you can incorporate a specific S-curve in the analysis.
Basics of Including Construction Timing in Levelised Cost
The calculation is illustrated in the screenshot below. As with other exercises, the formula is proved with a little financial model. The key formula to make this work is the FV formula shown in row 16 and in row 21.