project final report

project final report - Regency Petroleum Company Bunker Oil...

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Unformatted text preview: Regency Petroleum Company Bunker Oil and #2 Heating Oil Operations in Jacksonville, Florida November 30, 2011 William Lane Olivia Nixon Michael Shelton November 30, 2011 Table of Contents Executive Summary.3-4 Introduction..5 Background..6-7 Assumptions..8 Financial analysis.9 Sensitivity analysis..10 Recommendations...11 Conclusions.12 Appendix A.........13 Appendix B..14 Appendix C.15 Appendix D.16 November 30, 2011 Executive Summary The Regency Petroleum Company is considering two alternatives regarding the current receiving, sorting and distribution center for Bunker Oil and #2 Heating Oil in Northeast Florida. Due to projections that Gateway Oil Company will not renew the throughput agreement when it expires on December 31, 2012, Regency should either cease operations in Northeast Florida or construct its own facilities. A new facility will have a useful life of 20 years, cost $10 million to construct, and will be ready for operation by the end of 2012. This facility will be constructed on land leased from the Jacksonville Port Authority for $600,000 per year. Other costs will arise throughout the life on the facility including computers, trucks and vehicles, and pumps and tanks. The computer system will be upgraded every 5 years at a cost of $100,000 and is depreciated with a MACRS 5 year class life; the initial cost of the computer system is included in $10 million initial construction cost. Replacement pumps and tanks will be purchased in year 10 of the project for $250,000 and are depreciated with a MACRS 10 year class life. Finally, trucks and vehicles will be purchased at the start of every year for $100,000 and will be depreciated with a MACRS 5 year class life. The fleet of trucks Regency currently owns will also be put to use with this new facility; at the end of 2012, these assets will have a book value of $200,000, can be depreciated over the first 5 years with straight line depreciation, and will have a fair market value of $1 million....
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project final report - Regency Petroleum Company Bunker Oil...

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