Safetyand reliability are issues to consider as well.The candidate should address most of these issues in evaluating the qualitative risks. The company will have to spend aconsiderable amount of time and money on training and hiring new personnel. Thiswill likely prevent other capital investments in the near future.Nuclear technology is complicated and one major risk is the shortage of personnelwith the necessary skills to run the plant. If the firm goes ahead with thisinvestment it will need to rely heavily on debt financing or more expensive equity. Thebreakeven period for the plant is almost 13 years which is much longer than theindustry average breakeven period of 6-7 years. The market capof the firm is $6Billion and this investment alone is estimated to be $7.75Billion. The variable cost is $10/MWh.Contribution = $80-$10 = $70/MWh which translates to $70,000/GWhAnnual contribution = 8,760 GWh *$70,000/GWh = $613.2 MThe breakeven point of the investment is $7.75B/$0.6132B = 12.6 years ~ 13 yearsPhase 3Qualitatively evaluate the financial and organizational risks.There are some critical financial risks associated with this investment. The capacity of the plant will be8,760 GWh per year.The price for each MWh (not GWh) is fixed at $80/MWh.
CAPITAL INVESTMENT FOR UTILITYPhase 2Evaluate the revenue streams and contribution margin.
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