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PowerCo Final Project - Running head PowerCo Final project...

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Running head: PowerCo Final project 1 Dustin Taylor 8/14/2011 FIN-301 Karen Crisonino
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PowerCo Final Project 2 Introduction The purpose of this report is to analyze the data constructed by Powerco's economists to determine the potential profit or loss that would be obtained by building a new power generator. Because of increased demand, the current power plant will not sufficiently supply the demand for electricity over the next 10-12 years. A proposal has been set forth, and this report will determine if the new power generator should be constructed. Analysis Present value of expected costs: PV = $1/(1+i)^n Year Expected Costs (in millions) Interest Factor @ 8% Present Value (in millions) 1 25 .92593 23.14825 2 28 .85734 24.00552 47.15377 The present net value of the expected costs for the new generator is $47,153,770 . Present value of the expected after-tax cash profits: PV = $1/(1+i)^n Year Expected After-Tax Revenue (in millions) Interest Factor @8% Present Value (in millions) 3 6 .79383 4.76298 4 7 .73503 5.14521 5 8 .68058 5.44464 6 9 .63017 5.67153 7 9 .58349 5.25141 8 9 .54027 4.86243 9 9 .50025 4.50225 10 9 .46319 4.16871 11 9 .42888 3.85992 12 9 .39711 3.57399
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