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Your boss believes the companys power plant is producing too much air pollution on a typical island Your boss gives you three choices dealing with this problem because he she does not want with

Your boss believes the company's power plant is producing too much air pollution on a typical island. Your boss gives you three choices dealing with this problem because he/she does not want with 1. You can pay a pollution tax (Carbon offsets) one time of $13,000,000 immediately. 2. You can close the plant and install a power cable from the mainland to the Island. That will cost you $1,000,000 at the end of this year, $3,000,000 a the end of next year and then $750,000 forever for maintenance. 3. You can retrofit the plant with scrubbers to reduce the emissions to make the plant green. That will cost $7.5m at the end of this year and $100,000 for 50-years for maintenance. Assume that the cost of generating power on the mainland is approximately the same as the cost of generating power at the Island's plant. Assume, this comes as a surprise to you and you, have not saved any money in reserves, and you need to raise capital. Additional information is that market has a 12 percent market risk premium on the power plant with the risk-free rate being 5 percent with a company tax rate of 35 percent.

 

Apr 13 2020 View more View Less

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