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Swissgrid Deliverable 3.docx - Case 1. Potential changes in...

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Case 1. Potential changes in government policy that decreases depreciation by 40% peryearIn Segal’s value-based ERM approach, risk can be defined as well as quantified through anydeviation from expectations. Such risks have an impact on the baseline company value.One of the risks that Meyers took into consideration when creating Swissgrid’s ERM framework,is regulatory risk such as new rules affecting TSOs (Kaplan & Mikes, 2018 p. 8) or governmentsubsidy of renewable energy production (Kaplan & Mikes, 2018 p. 2).Potential impact of the scenariosPotential changes to government policies is a deviation from expectation that may decreasedepreciation by 40% every year.The table below highlights the potential impact of government policies to Swissgrid’s cash flow.Cash Flow = Net Income + Depreciation and AmortizationTable 1: Cash Flow after 40% decrease in depreciationYear201820192020202120222023Net Income95.698.2100.9103.6106.4109.3Depreciation64.666.065.365.365.665.4Amortization24.125.828.426.126.827.1Cash Flow184.3190.1194.6195.0198.7201.8Table 2 highlights the changes in cash flow before and after the 40% decrease in depreciation.

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Term
Winter
Professor
N/A
Tags
Generally Accepted Accounting Principles, Years in the future, Enterprise risk management

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