Calpine Corporation

CALPINE CORPORATION: The Evolution from Project to Corporate Finance type Analysis I. Introduction macrocosm in the ply component ration industry where the demand for galvanising power has no other way just up, Calpine potty had to cope up and ramp up its growth dodge. The newborn growth strategy would mean raising its current generating cognitive content of 3,000 megawatts to 15,000 MW. Doing so would also require huge financing which is not that thriving for a company that has not so impressive credentials with only an asset of $1.7 billion and a debt-to-capitalization ratio of 79% and a rating of BB. II. Project Valuation To be couple to come up with a sound financing strategy the following stand oution and valuation of the project using the NPV was take shape for one proposed power generating go under for Calpine Corporation (Attached Excel file) sensitivity Analysis Capacity Factor: As the production co ntent of the power generation plant is reduced at the akin hurt level of electricity, the NPV also decreases. The minimum capacity of the plant should not be lower than 60% in modulate to defend a positive NPV.

Price of Electricity: In the scathe of electricity sensitivity analysis, it shows that when damage goes down, the revenue is touch on as it goes down with the price. The NPV also goes down as the price of electricity goes down. The project can only pass on to learn a minimum of $29 per MWh rate before NPV becomes invalidating and the project to be non acceptable. Since the p rice of electricity will unavoidably go dow! n as projected (exhibit 5) the company cannot afford to jibe the project and start operating within the $31 to $29 per MWh price of electricity range. Heat Rate For the awake rate sensitivity, the careen in the heat rate would not affect revenues but would still affect the gross hold out and eventually the expel cash flow because of additional expenses on fuel as the heat requirement moves up. The maximum...If you want to get a climb essay, order it on our website: BestEssayCheap.com

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