Overall Net Present Essay
Final Project
PowerCo
Instructor:
Date Submitted:
The purpose of the following analysis is to determine whether PowerCo, a medium sized power company in the southeast United States should build a new generator. It is the belief of PowerCo that demand for electricity will significantly increase over the next 1012 years. In order to meet this demand, the investment in a new generator needs to be reviewed. PowerCo’s Treasury department has prepared financial projections to facilitate the analysis of the investment. This information will be used for the analysis in order to provide a recommendation of whether PowerCo should build or not build the new generator.
The Present Value of the expected …show more content…
Based upon the above analysis alone, it would be my recommendation for PowerCo to build the new generator. The basis of this recommendation is due to the positive $89,000 overall Net Present Value which according to capital budgeting NPV acceptance or rejection criteria says to accept. Costs will not only be covered, but the value of the firm will increase, a positive for investors. It is my belief though that with such a low Net Present Value, PowerCo should review the overall plans for this investment to see if there is anything they can do to increase the Net Present Value to make it a

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