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Case
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Reference no. UVA-QA-0469
Authors: Samuel E Bodily
Published by: Darden Business Publishing
Originally published in: 1994
Version: 06.2010
Revision date: 11-Jul-2011
Length: 6 pages
Data source: Field research

Abstract

An electric utility faces the hard choice between losing their third largest customer or building a cogeneration plant that is very risky to them and appears to take value away from the firm. Students first assess their strategic position and the magnitude of the risk, in the process improving the assumptions of the discounted cash flow spreadsheet model available to them. The task is then to be shrewd and creative in reducing and managing the risk of the project, which, after all, is manageable.
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Abstract

An electric utility faces the hard choice between losing their third largest customer or building a cogeneration plant that is very risky to them and appears to take value away from the firm. Students first assess their strategic position and the magnitude of the risk, in the process improving the assumptions of the discounted cash flow spreadsheet model available to them. The task is then to be shrewd and creative in reducing and managing the risk of the project, which, after all, is manageable.

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