Fin – florida power & light (fp&l) is the primary subsidiary

Florida Power & Light (FP&L) is the primary subsidiary of Florida Power & Light Group, representing 84% of their earnings. FP&L is a utility company that supplies electric service throughout most of Florida’s eastern seaboard. Their service area contains 27,605 square miles which translates into approximately 4 million customers. Of these 4 million customers, as a percentage of operating income, roughly 55% comes from residential customers, 35% from commercial, 4% from industrial, and the remaining 6% from other sources. 
Paul Seiler, a senior contracts agent in the nuclear division at FP&L’s Turkey Point Plant in Florida City, Florida, is debating on whether to renew or replace the commercial nuclear reactor’s reactimeter. A reactimeter is a vital component of the nuclear power generating process. 
The core of a nuclear reactor must be maintained at a certain temperature and must possess a particular chemical composition. Any deviation from this sensitive optimal mix will result in the sub-optimization of the plant and a corresponding waste of energy. The reactimeter is a computer with accompanying software that is used to monitor the requisite characteristics of the Reactor Coolant System (RCS) and make minor adjustments as needed. 
Alternative 1: 
In order to determine whether the reactimeter should be renewed or replaced, Paul had to gather some financial information. If the current computer system is upgraded and new software is purchased, the cost will be $80,000. An additional $5,000 will be required to have the system installed and calibrated for accuracy. The renewed computer system will have a useful life of just five years and will be depreciated in compliance with the MACRS five year recovery system. Depreciation rates for years one through five are .20, .32, .19, .12, and .12, respectively. Only the purchase cost of $80,000 will be depreciable, not the installation cost. 
At the end of the five year period, the renewed machine can be sold for $5,000 before taxes. The renewed machine would also result in an increase in net working capital of $20,000. Net profits resulting from an increase in operational efficiency for each year will be as follows: 
Table 1 
Year Net increase in profits 
1 $650,000 
2 $425,000 
3 $317,000 
4 $220,000 
5 $129,000 

Alternative 2: 
The new system will also have a five year life and will be depreciated in compliance with the MACRS five year recovery system. The fully depreciable cost of the new system will be $100,000. Installation costs will be an additional $5,000. At the end of the five year period, the renewed machine can be sold for $10,000 before taxes. Implementing the new machine would result in an increase in net working capital of $15,000. If FP&L decides to replace the old system with a new reactimeter, the resulting net profits will be: 
Table 2 
Year Net increase in profits 
1 $350,000 
2 $350,000 
3 $350,000 
4 $350,000 
5 $350,000 
If a new system is purchased, the old system can be salvaged for $10,000. Finally, FP&L has a 40% corporate tax rate. 
1. What is the initial investment associated with both alternatives? 
2. Calculate the net after-tax operating cash inflows associated with both alternatives. 
3. Calculate the year 5 cash flow associated with the sale of the computer for both alternatives. That is, remember to consider that both computer systems can be sold at the end of the fifth year. 
4. Using a discount rate of 10%, calculate the present value of both alternatives. Which alternative should Paul choose? 
5. What are some of the qualitative factors to consider when making a decision between the two alternatives? 
6. Based on your answers from questions 4 and 5, has your decision changed concerning which alternative is preferred? 

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10