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


Florida Influence & Light (FP&L) is the important corroborative of Florida Influence & Light Group, representing 84% of their rights. FP&L is a profit aggregation that produce electric labor throughout most of Florida's eastern seacoast. Their labor area contains 27,605 balance miles which translates into closely 4 favorite customers. Of these 4 favorite customers, as a percentage of untrammelled allowance, roughly 55% comes from residential customers, 35% from marketable, 4% from industrial, and the cherishing 6% from other sources. 
Paul Seiler, a elder contracts principal in the nuclear analysis at FP&L's Turkey Point Settle in Florida City, Florida, is debating on whether to repeat or supply the marketable nuclear reactor's reactimeter. A reactimeter is a essential content of the nuclear influence generating regularity. 
The nucleus of a nuclear reactor must be maintained at a undeniable temperature and must hold a point chemical adjustment. Any deflexion from this sentient optimal mix conciliate outcome in the sub-optimization of the settle and a similar wane of essence. The reactimeter is a computer delay cognate software that is used to adviser the defective characteristics of the Reactor Coolant Method (RCS) and fabricate junior adjustments as needed. 
Alternative 1: 
In direct to determine whether the reactimeter should be repeated or supplyd, Paul had to infer some financial notice. If the popular computer method is upgraded and new software is forfeitured, the consume conciliate be $80,000. An appended $5,000 conciliate be required to enjoy the method installed and calibrated for ratification. The repeated computer method conciliate enjoy a conducive society of true five years and conciliate be depreciated in consent delay the MACRS five year retrieval method. Depreciation blames for years one through five are .20, .32, .19, .12, and .12, respectively. Only the forfeiture consume of $80,000 conciliate be depreciable, not the installation consume. 
At the end of the five year duration, the repeated muniment can be sold for $5,000 precedently taxes. The repeated muniment would so outcome in an acception in net agoing principal of $20,000. Net avail outcomeing from an acception in operational pliancy for each year conciliate be as follows: 
Table 1 
Year Net acception in avail 
1 $650,000 
2 $425,000 
3 $317,000 
4 $220,000 
5 $129,000 

Alternative 2: 
The new method conciliate so enjoy a five year society and conciliate be depreciated in consent delay the MACRS five year retrieval method. The abundantly depreciable consume of the new method conciliate be $100,000. Installation consumes conciliate be an appended $5,000. At the end of the five year duration, the repeated muniment can be sold for $10,000 precedently taxes. Implementing the new muniment would outcome in an acception in net agoing principal of $15,000. If FP&L decides to supply the old method delay a new reactimeter, the outcomeing net avail conciliate be: 
Table 2 
Year Net acception in avail 
1 $350,000 
2 $350,000 
3 $350,000 
4 $350,000 
5 $350,000 
If a new method is forfeitured, the old method can be salvaged for $10,000. Finally, FP&L has a 40% municipal tax blame. 
Questions 
1. What is the judicious investment associated delay twain resources? 
2. Observe the net after-tax untrammelled specie inflows associated delay twain resources. 
3. Observe the year 5 specie run associated delay the sale of the computer for twain resources. That is, recall to attend that twain computer methods can be sold at the end of the fifth year. 
4. Using a abatement blame of 10%, observe the bestow estimate of twain resources. Which resource should Paul cull? 
5. What are some of the qualitative factors to attend when making a firmness betwixt the two resources? 
6. Based on your answers from questions 4 and 5, has your firmness radical of which resource is preferred?