Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 2. (15 points) a power company is preparing a bid

2. (15 points) A power company is preparing a bid to become the lead contractor...

90.2K

Verified Solution

Question

Finance

image
2. (15 points) A power company is preparing a bid to become the lead contractor on a nuclear power plant in Japan. The plant will be part of a new generation of smaller-scale pocket" power plants. It is estimated it will cost $2,620 million to construct and make operational including all the design work, safety testing, hiring and training of staff, and equipment. It is expected to generate cash of about $390 million per year for 10 years, at which point it will be shut down. To safely decommission the plant at that point in time will cost an estimated $890 million. Assume the firm has 5% cost of capital. a) Calculate the payback period. b) Calculate the pocket power plant project's discounted payback period. c) Calculate the system's NPV. d) You colleague claims that the IRR (internal rate of return) is about 3.43%. Is he right? Why? (Considering the project's scale, any cash less than 1 million can be considered as 0) e) Calculate project's profitability index

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students