The health system you work for has its own power generation plant, which it built in the 1970s to ensure reliable access
Posted: Thu May 05, 2022 8:06 am
The health system you work for has its own power generation
plant, which it built in the 1970s to ensure reliable access to
electricity. Due to changes in the electrical grid, there now are
many sources of power that the health system can rely upon and the
power plant is no longer considered necessary. The plant could be
sold for $200 million and currently generates annual revenue of $80
million and operating income of $19 million. There is no particular
reason to expect these economics to change in the coming years. The
board has asked you to opine on the financial value of selling the
power plant. The health system has a WACC of 7.6%. What do you
recommend?
A) Keep it
B) Sell it
plant, which it built in the 1970s to ensure reliable access to
electricity. Due to changes in the electrical grid, there now are
many sources of power that the health system can rely upon and the
power plant is no longer considered necessary. The plant could be
sold for $200 million and currently generates annual revenue of $80
million and operating income of $19 million. There is no particular
reason to expect these economics to change in the coming years. The
board has asked you to opine on the financial value of selling the
power plant. The health system has a WACC of 7.6%. What do you
recommend?
A) Keep it
B) Sell it