Reference no: EM132478354

The question is: 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. The managerial team has already paid a financial analyst $1,000 to forecast the cash flows mentioned above. Assume the firm has 5% cost of capital. Show that the power plant's IRR (internal rate of return) is about 3.4%. How would I set up the formula to show this?