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    MInicase Chapter 10 The Power To Cool Off in Florida

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    red_ammy057
    This case discusses a cogeneration power plant project in Florida with a capital cost of $135 million. [1] It generates electricity and steam from the same facility. Financial analysis shows the project has a positive NPV and IRR above the cost of capital, indicating it should be accepted. [2] Calculations of interest and cash flow coverage ratios each year meet the required levels, demonstrating the project's ability to meet its debt obligations. [3]

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    MInicase Chapter 10 The Power To Cool Off in Florida

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    red_ammy057
    42 views1 page
    This case discusses a cogeneration power plant project in Florida with a capital cost of $135 million. [1] It generates electricity and steam from the same facility. Financial analysis shows the project has a positive NPV and IRR above the cost of capital, indicating it should be accepted. [2] Calculations of interest and cash flow coverage ratios each year meet the required levels, demonstrating the project's ability to meet its debt obligations. [3]

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    Additional Case Notes

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    MInicase Chapter 10 The Power to Cool Off in Florida

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    This case discusses a cogeneration power plant project in Florida with a capital cost of $135 million. [1] It generates electricity and steam from the same facility. Financial analysis shows the project has a positive NPV and IRR above the cost of capital, indicating it should be accepted. [2] Calculations of interest and cash flow coverage ratios each year meet the required levels, demonstrating the project's ability to meet its debt obligations. [3]

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    42 views1 page

    MInicase Chapter 10 The Power To Cool Off in Florida

    Uploaded by

    red_ammy057
    This case discusses a cogeneration power plant project in Florida with a capital cost of $135 million. [1] It generates electricity and steam from the same facility. Financial analysis shows the project has a positive NPV and IRR above the cost of capital, indicating it should be accepted. [2] Calculations of interest and cash flow coverage ratios each year meet the required levels, demonstrating the project's ability to meet its debt obligations. [3]

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    CFM3 Ch 10 Minicase The Power to Cool Off in Florida Additional Case Notes
    Objective: This case demonstrates the use of NPV, IRR, and financial ratios for evaluating a capital budgeting project. ase !iscussion: The Indianto"n ogeneration Project involved the construction and operation of a coal#fired plant in $artin ount%, &lorida, that produces electricit% and steam. It's called a cogeneration project because it produces (cogenerates) t"o forms of energ%, electricit% and steam, from the same production facilit%. The capital cost "as appro*imatel% +,,- million. It has an electric generating capacit% of ..- mega"atts (net) and a steam capacit% of /,0,--- pounds per hour. The project's electricit% revenue has t"o parts: one pa%ment for electric capacit% and the other for the electric energ% it sells. The project's financing consisted of +1.- million of 23 4PR interest rate debt and +/5- million of e6uit%. The debt matures .- %ears from the date it "as issued (the last %ear of the projected &4Ts) and re6uires e6ual annual sin7ing fund pa%ments of +./.0 million beginning in %ear // (%ear /- of the projections). !epreciation is straight line to 8ero over 9- %ears. The ta* rate is 5-3. The case provides the operating data in the case to estimate the &4Ts for the project. :uestions ; $ethodolog%: /. <stimate the project's &4Ts for each of the .- %ears using the case information and the <*cel template. 9. =sing the ,./03 >4 cost of capital given, and assuming that the project's assets have a 8ero salvage value, compute the project's NPV and IRR. The +,,million project cost is the initial (time 8ero) cash flo". To find the IRR of the project, use a ?guess@ interest rate in <*cel higher than the >4 . .. The debt "as issued a %ear before the project "as completed. alculate the interest coverage ratio and cash flo" coverage ratio for each of %ears /- (the first %ear of the sin7ing fund, %ear // of the debt) through 9-. ABO> CO=R >ORD. Bint: >hen the project starts ma7ing sin7ing fund pa%ments, annual interest e*pense "ill decrease.

    5. >ill the project be able to meet its annual debt service obligationsE <*plain %our reasoning.

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