UniStar Nuclear Inc., is a company that generates nuclear energy and it is constructing a new...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
UniStar Nuclear Inc., is a company that generates nuclear energy and it is constructing a new nuclear power plant in Ontario. The government has determined that it is a strategic project for the growth of the region and for that reason there are no taxes charged to this project. UniStar Nuclear Energy is expected to generate $800 million in revenues and $300 million in expenses during the 4 years that is expected to last the project. The uranium inventories have increased in $100 million at the start of the project but just half of this value can be collected at the end of the fourth year. The initial investment is $1,000 million and the salvage value at the end of year four will be just 20% of the initial investment in the power plant. If the cost of capital is 5%. Assume that the power plant will depreciate during the 4 years, but there are not tax shields generated. a) What is the value of the cash flow in year 4? (terminal cash flow) b) What is the NPV of the project? UniStar Nuclear Inc., is a company that generates nuclear energy and it is constructing a new nuclear power plant in Ontario. The government has determined that it is a strategic project for the growth of the region and for that reason there are no taxes charged to this project. UniStar Nuclear Energy is expected to generate $800 million in revenues and $300 million in expenses during the 4 years that is expected to last the project. The uranium inventories have increased in $100 million at the start of the project but just half of this value can be collected at the end of the fourth year. The initial investment is $1,000 million and the salvage value at the end of year four will be just 20% of the initial investment in the power plant. If the cost of capital is 5%. Assume that the power plant will depreciate during the 4 years, but there are not tax shields generated. a) What is the value of the cash flow in year 4? (terminal cash flow) b) What is the NPV of the project?
Expert Answer:
Answer rating: 100% (QA)
a To calculate the terminal cash flow in year 4 we need to consider the salvage value of the power p... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
Students also viewed these finance questions
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
What are conjugate faults, and what stress information do they give?
-
Knowing that the pulley has a radius of 75 mm, determine the components of the reactions at A and B. 125 75 n -0 - -00 - N
-
For most of his life, New York City businessman I. Jerome Riker was a powerful man with an extensive network of influential friends and business associates. Probably the most influential of Riker's...
-
Standards can be technical, performance-based or process-based. Distinguish between these three categories and identify the category that applies to standards for environmental management systems.
-
Yummy Cereal Company is offering one toy shovel set for 15 box tops of its cereal. Year-to-date sales have been off, and it is hoped that this offer will stimulate demand. Each shovel set costs the...
-
Find the limit d) lim sin (x-1) x-1 x+x-2
-
A two-phase liquid-vapor mixture of H2O with an initial quality of 25% is contained in a piston-cylinder assembly. The mass of the piston is 40 kg, and its diameter is 10 cm. The atmospheric pressure...
-
How do charismatic leadership attributes influence organizational culture and employee motivation, and what potential pitfalls should leaders be mindful of when exercising charismatic influence ?...
-
If equity is $ 2 9 8 , 0 0 0 and liabilites are $ 1 9 1 , 0 0 0 , then assets equal:
-
Chris Cornell purchased a rental property on January 1, 2023, for $400,000. Not considering the value of the land, the building's cost is $320,000 (as CCA does not apply to land). The building falls...
-
You believe that a company will pay a $ 2 dividend per share next year and following this year the dividends will have a dividend growth rate of 6 % annually in perpetuity. You want a 1 2 % yield in...
-
1. Figure 1 reproduces John's notes on Pioneer Gypsum and Global Mining. Calculate the expected return, risk premium, and standard deviation of a portfolio invested partly in the market and partly in...
-
You estimate you will need a nest egg $2070000 for retirement. You should deposit $ 1356.47 each month for the next 40 years into an account with an APR of 5% compounded monthly to reach your goal....
-
As the CFO of a small manufacturing firm, you have been asked to determine the best financing for the purchase of a new piece of equipment. The vendor is offering the following two repayment options....
-
For the vector whose polar components are (Vr = 1, Vθ = 0), compute in polars all components of the second covariant derivative Vα;μ;ν. To find...
-
Intel is a global leader in manufacturing microprocessors, which is very capital-intensive. The production processes in microprocessor manufacturing require sophisticated technology, and the...
-
Describe the difference between the profit margin for ROA and the profit margin for ROCE. Explain why each profit margin is appropriate for measuring the rate of ROA and the rate of ROCE,...
-
Selected financial data for Georgia-Pacific Corporation, a forest products and paper firm, appear in Exhibit 4.28. REQUIRED a. In which years did financial leverage work to the advantage of the...
-
Consider an economy in long-run equilibrium with an inflation rate, \(\pi\), of \(12 \%(0.12)\) per year and a natural unemployment rate, \(u_{n}\), of \(4 \%(0.04)\). The expectations-augmented...
-
In a certain economy, the expectations-augmented Phillips curve is a. Graph the Phillips curve of this economy for an expected inflation rate of 0.075 . If the Fed chooses to keep the actual...
-
How do expropriation and confiscation differ?
Study smarter with the SolutionInn App