Free Essay

Powerco

In:

Submitted By santidiaz86
Words 444
Pages 2
The purpose of this report is to analyze the data constructed by PowerCo to determine the potential profit or loss of building a new power generator. Because of the increase in demand, the current power plant will not be able to supply the demand for electricity over the next 10-12 yrs. A proposal has been made, and this report will determine if a new power generator should be constructed.
Present Value (Pv) of Expected cost, Cf=Cash flow
Pv=Cft/(1+r)˄t
Year Expected Cost in Millions Calculation Present Value in Millions 1 25 Pv=25/(1+.08)˄1 23.14825
2 28 Pv=28/(1+.08)˄1 24.00552 47.15377
The Present Value of the expected cost for the new generator is $47,153,770.
Present Value of the expected after tax cash profits
Pv=Cft/(1+i)˄t
Year Expected Cost in Million Calculation Present Value in Millions 3 6 Pv=6/(1+.08)˄3 4.76299
4 7 Pv=7/(1+.08)˄4 5.14521
5 8 Pv=8/(1+.08)˄5 5.44466
6 9 Pv=9/(1+.08)˄6 5.67152
7 9 Pv=9/(1+.08)˄7 5.25141
8 9 Pv=9/(1+.08)˄8 4.86241
9 9 Pv=9/(1+.08)˄9 4.50224
10 9 Pv=9/(1+.08)˄10 4.16874
11 9 Pv=9/(1+.08)˄11 3.85994
12 9 Pv=9/(1+.08)˄12 3.57402 47.24314
The Present Value of the expected after tax cash profits $47,243,140

The Present Value of the expected cost for the new generator is $47,153,770, and the Present Value of the expected after tax cash profits is $47,243,140, giving PowerCo a Net Present Value of $89,370 (Inflows – outflows, 47.24314-47.15377=0.08937). Net Present Value is an indicator of how much of a value investment adds to PowerCo. This shows that the project will add $89,370 of a value to the company. The risk inherited in deciding to build the facility is how true their probability of their expectations is. Will the demand of electricity increase as expected to cover the cost. Will the surrounding economics effect their profit, for example, renewable energy? Will the machine work with their expectations and generate the profit that’s projected. For PowerCo, they should construct the new generator plant to meet the demands as they can ensure the future demand will increase giving them a profit of $89,370 from the new plant. In addition, if the facility works more than 10 years, the value added to the firm will increase over time.

Similar Documents

Free Essay

Powerco Generators

...this report is to analyze the data constructed by PowerCo to determine the potential profit or loss of building a new power generator. Because of the increase in demand, the current power plant will not be able to supply the demand for electricity over the next 10-12 yrs. A proposal has been made, and this report will determine if a new power generator should be constructed. Present Value (Pv) of Expected cost, Cf=Cash flow Pv=Cft/(1+r)˄t Year Expected Cost in Millions Calculation Present Value in Millions 1 25 Pv=25/(1+.08)˄1 23.14825 2 28 Pv=28/(1+.08)˄1 24.00552 47.15377 The Present Value of the expected cost for the new generator is $47,153,770. Present Value of the expected after tax cash profits Pv=Cft/(1+i)˄t Year Expected Cost in Million Calculation Present Value in Millions 3 6 Pv=6/(1+.08)˄3 4.76299 4 7 Pv=7/(1+.08)˄4 5.14521 5 8 Pv=8/(1+.08)˄5 5.44466 6 9 Pv=9/(1+.08)˄6 5.67152 7 9 Pv=9/(1+.08)˄7 5.25141 8 9 Pv=9/(1+.08)˄8 4.86241 9 9 Pv=9/(1+.08)˄9 4.50224 10 9 Pv=9/(1+.08)˄10 4.16874 11 9 Pv=9/(1+.08)˄11 3.85994 12 9 Pv=9/(1+.08)˄12 3.57402 47.24314 The Present Value of the expected after tax cash profits $47,243,140 The Present Value of the expected cost for the new generator is $47,153,770, and the Present Value of the expected after tax cash profits is $47,243,140, giving PowerCo a Net Present Value of $89,370 (Inflows – outflows...

Words: 450 - Pages: 2

Free Essay

Rewarding Relationships: a Study of the Interaction of Employment Relationships and Employee Rewards Systems in Two Unionised Private Sector Organisations

...Citation: Creaby-Attwood, Nick (2010) Rewarding Relationships: A Study of the Interaction of Employment Relationships and Employee Rewards Systems in Two Unionised Private Sector Organisations. Doctoral thesis, Northumbria University. This version was downloaded from Northumbria Research Link: ht tp://nrl.northumbria.ac.uk/4415/ Northumbria University has developed Northumbria Research Link (NRL) to enable users to access the University’s research output. Copyright © and moral r ights for i tems on NRL are retained by the individual author(s) and/or other copyright owners. Single copies of full i tems can be reproduced, displayed or performed, and given to third parties in any format or medium for personal research or study, educational, or not-for-profit purposes without prior permission or charge, provided the authors, ti t le and full bibliographic details are given, as well as a hyperlink and/or URL to the original metadata page. The content must not be changed in any way. Full i tems must not be sold commercially in any format or medium without formal permission of the copyright holder. The full policy is available online: http://nrl.northumbria.ac.uk/policies.html REWARDING RELATIONSHIPS: A STUDY OF THE INTERACTION OF EMPLOYMENT RELATIONSHIPS AND EMPLOYEE REWARDS SYSTEMS IN TWO UNIONISED PRIVATE SECTOR ORGANISATIONS NICK CREABY-ATTWOOD PhD 2010 REWARDING RELATIONSHIPS: A STUDY OF THE INTERACTION OF EMPLOYMENT RELATIONSHIPS AND EMPLOYEE REWARDS...

Words: 103288 - Pages: 414

Premium Essay

Delloit

...Consolidation of Variable Interest Entities A Roadmap to Applying the Variable Interest Entities Consolidation Model March 2010 FASB material, copyright © by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, is reproduced with permission. This publication is provided as an information service by the Accounting Standards and Communications Group of Deloitte & Touche LLP. It does not address all possible fact patterns and the guidance is subject to change. Deloitte & Touche LLP is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte & Touche LLP shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, “Deloitte” means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. March 2010 Contents Acknowledgments Introduction Section 1 — Overview, Background, and Scope 1.01 1.02 Determining Which Consolidation Model to Apply Consideration of Substantive Terms...

Words: 156481 - Pages: 626

Premium Essay

Current Issues

...2011 NZOG Annual Report 2009 2 Contents 2 3 5 6 7 8 9 10 12 13 48 49 53 57 Chairman’s Review CEO’s Review Reserves and Production Directors Declaration Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cashflow Notes to the Financial Statements Audit Report Corporate Governance Statement Shareholder Information Corporate Directory NZOG Annual Report 2011 Chairman’s Review During the year ended 30 June 2011 the company faced a very challenging time in dealing with the adverse flow-on impact of its investments in Pike River Coal Ltd (PRCL), whose mine near Greymouth suffered from explosions and a tragic loss of lives in November 2010. However, despite the resultant losses on NZOG’s investments in PRCL, which have been provided for in the financial statements, NZOG still ended the year in a very sound financial position and having an expanded outlook overall for its oil and gas operations. sands. There is potential for a sizeable discovery. NZOG holds a 90% interest in PEP 51311 but is amenable to farming down its equity to around 50%. As an adjunct to these and other New Zealand activities, which still form the core of NZOG’s operations, the company has now acquired interests overseas, through the award of a prospecting permit in offshore Tunisia and a joint study area in onshore Indonesia (Sumatra). In Tunisia the Diodore...

Words: 29017 - Pages: 117