23. Equivalent annual cash flow (S6.4) In 2022, the California Air Resources Board (CARB) started planning its
Question:
23. Equivalent annual cash flow (S6.4) In 2022, the California Air Resources Board (CARB)
started planning its “Phase 3” requirements for reformulated gasoline (RFG). RFG is gasoline blended to tight specifications designed to reduce pollution from motor vehicles. CARB consulted with refiners, environmentalists, and other interested parties to design these specifications.
As the outline for the Phase 3 requirements emerged, refiners realized that substantial capital investments would be required to upgrade California refineries. Assume a refiner is contemplating an investment of $400 million to upgrade its California plant. The investment lasts for 25 years and does not change raw material and operating costs. The real (inflation-adjusted)
cost of capital is 7%. How much extra revenue would be needed each year to recover that cost?
Step by Step Answer:
Principles Of Corporate Finance
ISBN: 9781264080946
14th Edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen, Alex Edmans