## Mini Case: The Power to Cool Off in Florida (Indiantown Cogeneration Project)

CFM3 Ch 10 Minicase The Power to Cool Off in Florida             in \$19 only

Objective:
This case demonstrates the use of NPV, IRR, and financial ratios for evaluating a capital budgeting project.
Case Discussion:
The Indiantown Cogeneration Project involved the construction and operation of a coal-fired plant in Martin County, Florida, that produces electricity and steam. The capital cost (including interest during construction) was approximately \$770 million. Since completion, it has an electric generating capacity of 330 megawatts (net) and a steam capacity of 175,000 pounds per hour. The project sells the electric power to Florida Power & Light Company (FPL) under a 30-year contract and the steam to Caulkins Indiantown Citrus Company under a 15-year contract.

FPL’s electricity payments have two parts: one for electric capacity and the other for the electric energy that it receives.

The project’s financing consisted of \$630 million of 30-year 9% APR interest rate debt and \$140 million of equity. The debt requires equal annual sinking fund payments of \$31.5 million beginning in year 11. Depreciation is straight line to zero over 20 years. The tax rate is 40%. Other information about the project includes:

## Statistics Questions

1. A health magazine presented results of a recent study that analyzed data collected by the U.S. Census Bureau in 2000.  Results reveal that for both men and women in the U.S., heart disease remains the number on killer, victimizing 500,000 people annually.  Age, obesity, and inactivity all contribute to heart disease, and all three of these factors vary considerably from one location to the next.  The highest mortality rates (death per 100,000 people) were reported in New York, Florida, Oklahoma, And Arkansas, whereas the lowest were reported in Alaska, Utah, Colorado, and New Mexico
• What is the population?
• What is the sample:
• Is the study descriptive or inferential In nature? Explain briefy
• Is the study observational or experimental?  Explain  briefyly
• What are the variables?
• What level of measurement was used to obtain data from the variables?
• Classify all the variables of the study as either attribute or numerical
• What parameter best characterizes the risk for each member of the population?

2.   Identify each of the following as examples of nominal, ordinal, discrete, or continuous variables:

• A poll of registered voters in Florida asking which candidate they support:
• The length of time required for a wound to heal when using a new medicine:
• The number of telephone calls arriving at a switchboard per five-minute period:
• The distance first-year college football players can kick a ball:
• The number of pages in a book:
• The rankings of employees on their job performance:

3.   Describe the four levels of measurement:

• Nominal:
• Ordinal:
• Interval:
• Ratio:

4. Construct a frequency distribution table to organize the following set of quiz scores:

3    5    4          6          2          3          4          1          4          3          7          7          3

4   5     8          3          2          4          7          10

5. Construct a grouped frequency distribution for the following 28 scores using a class width of 5.

23        20        18        22        12        14        21        23        16        21        22

21        16        18        27        30        17        24        21        27        19        29]

25        23        28        24        19        18

6.  Identify the sampling technique used to obtain a sample in each of the following.  Explain why you chose the sampling technique you did for each

• Everry 20th washing machine coming off an assembly line is checked for defects:
• District supervisors are selected using random number in order to determine annual salaries:
• Students at a local university are classified according to their major.  Then a random sample of 20 students from each major is selected:
• The first 40 people entering a supermarket are asked their opinion on the price of cooking oil:
• A state is divided into regions using zip codes.  A random sample of 30 zip code areas is selected: