Question
Tampa Electric Company (TECO) is planning a major upgrade in itscomputerized demand management system. In order to accommodate thisupgrade, a building will be constructed on
Tampa Electric Company (TECO) is planning a major upgrade in itscomputerized demand management system. In order to accommodate thisupgrade, a building will be constructed on land already owned bythe company. The building is estimated to cost $1.8M and will beopened in August of this year. The computer equipment for thebuilding will cost $2.75M, and all of?ce equipment will cost$225,000. Annual expenses for operating this facility (labor,materials, insurance, energy, etc.) are expected to be $325,000 forthe rest of this year. Use of the new demand management system isexpected to decrease fuel and other costs for the company by $1.8mthis year. If the company expects to earn 9% on its investments, isin the 35% tax bracket, and uses a 20-year planning horizon,determine the estimated after-tax cash ?ow from this project forthis year.
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