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An electric utility is considering a new power plant in northern Arizona. Power from the plant would be sold in the Phoenix area, where it is badly needed. Because the firm has received a permit, the plant would be legal; but it would cause some air pollution. The company could spend an additional $40 million at Year 0 to mitigate the environmental problem, but it would not be required to do so. The plant without mitigation would cost $240.62 million, and the expected cash inflows would be $80 million per year for 5 years. If the firm does invest in mitigation, the annual inflows would be $85.18 million. Unemployment in the area where the plant would be built is high, and the plant would provide about 350 good jobs. The risk adjusted WACC is 18%.
Calculate the NPV and IRR with mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign
Calculate the NPV and IRR without mitigation. Round your answers to two decimal places. Enter your answer for NPV in millions. Do not round your intermediate calculations. For example, an answer of $10,550,000 should be entered as 10.55.
A firm expects to pay dividends at the end of each of the next for years at $2, $1.50, $2.5 and $3.5. After year 4 growth is expected to be constant at 8%. If you require a 14% rate of return how much should you be willing to pay for this stock?
A 3.000 percent TIPS has an original reference CPI of 185.2. If the current CPI is 210.5, what is the par value and current interest payment of the TIPS?
You purchased 100 shares of ABC stock for $20 per share. One year later you received cash dividends of $1 per share and sold the stock for $22 per share. Your holding-period return was _______________. Compute the geometric average of the following r..
Explain how the table below works, i.e., what are the inputs, what are the outputs, and how are the inputs transformed into the outputs and explain how the investment in working capital changes (compared to the amount in Q2a) and why.
ou buy a share of The Ludwig Corporation stock for $23.80. You expect it to pay dividends of $1.08, $1.17, and $1.2675 in Years 1, 2, and 3, respectively, and you expect to sell it at a price of $30.64 at the end of 3 years. Calculate the growth rate..
BU440- What do you notice about the price and the cost of debt? What is the cost of debt for Kenny Enterprises if the bond sells at the following prices?
Rank from lowest credit risk to highest credit risk the following bonds, with the same time to maturity, by their yield to maturity:
The DASH80 Company has just sold non-strategic assets for $2 million for the purpose of self-financing a capital expansion program that may include purchase of a piece of manufacturing equipment for $1.5 million. The alternative is to lease the same ..
Which of the following is not an unsecured loan? Which of the following is not a source of cash?
After graduating from IU, you are hired by a company that offers a 401(k) retirement plan. You would like to save enough in this plan so that when you retire in 35 years you have an account balance of $1 million. You plan to make monthly contribution..
Know the difference between buying and selling volatility (aka debit or credit positions), and the implications for the theta component of a trade.
That is, depreciation each year is $10,975/5. The tax rate is 35 percent. What is the operating cash flow?
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