Calculate the risk exposure for Enron (Pty) Ltd to the supply of fuel to the Rheebok power station based on the information below for a period of 3 years. The cost of capital for Enron is 9%. Although it is difficult to link a quantum to the loss of human lives, the lives of Enron staff are insured for R100 000.The calculation should be done for: a. Alternative 1: Supplying fuel by truck. (4) b. Alternative 2: Supplying the fuel via the fuel pipeline from the depot in Mossel Bay to the Rheebok power station. (4) c. Based on the answers above, which alternative would you recommend to the board. For the purposes of the calculation ignore depreciation and income tax. (2) Oil price Per barrel $78.00 Litres fuel refined per barrel 100 Per litre $0.78 Staff component Top management 20 Senior management 25 Blue collar workers (Including maintenance) 80 Staff costs Per annum R15 000 000.00 Selling price of fuel Per litre R 14.00 Transport costs per truck load R7 500.00 Maintenance per truck Per annum R115 000.00 General Admin Per annum R1 500 000.00 Loan facility Per month R20 000 000.00 Value of a transport truck R2 000 000.00 Volume per truck 50 000 Number of trucks 12 Exchange rate R 13.38 Fixed fuel supply contract Per month 15 000 000 Building fuel pipe R12 000 000.00 Maintenance for the fuel pipe Per month R170 000.00 Fuel storage tank R1 500 000

Answer rating: 100% (QA)

To calculate the risk exposure for supplying fuel to the Rheebok power station via truck and fuel pipeline alternatives we need to consider the financ... View the full answer