1 / 4

Case Study: RCI and Southeastern

Case Study: RCI and Southeastern. Jianzhong Zhang. Situation. RCI, a large company, takes calculated risks in projects that could produce energy. Negotiated a contract to build and operate a resource recovery facility for Westborough county.

nelia
Télécharger la présentation

Case Study: RCI and Southeastern

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Case Study: RCI and Southeastern Jianzhong Zhang

  2. Situation • RCI, a large company, takes calculated risks in projects that could produce energy. • Negotiated a contract to build and operate a resource recovery facility for Westborough county. • Construction will take a year from 1992 and cost $50 million. • County will pay 5 equal installments of $10million when plant is 20, 40, 60, 80, and 100% complete. $10million will be held if plant didn’t work. • Produce stem with an annual energy equivalent of 100,000 barrels of oil. Two possible customers: Acme Company, Southeastern electric company. • Acme purchase steam from Nov. to April at a 20% discount form the price of Jan, 1st of each year, starting from Jan, 1st 1993 or 1994 • Southeastern just buy steam for 1993, but need build a generating facility, which will take one year and cost $1 million • Ignore the effects of taxes and time value of money

  3. Decision for RCI Give up • Price range $30 to $50, current $35 per barrel, uncertainty • Decide which steam will be sold to • Negotiate with Southeastern to get max benefit • Best: high price to sell to southeastern and no installments fee Doesn’t’ work -$10millon 0.3 build Sell to Acme 100,000*0.5*oil price*80% 0.7 100,000*price -installments fee Southeastern

  4. Decision for Southeastern Give up • Price from $30 to $50 • Negotiate with RCI about price of steam and installment fee Didn’t work - Fee to build the facility 0.6 build work Benefit from selling electric – 100,000* price – fee to build 0.4

More Related