Question
The health system you work for has its own power generation plant, which it built in the 1970s to ensure reliable access to electricity. Due
The health system you work for has its own power generation plant, which it built in the 1970s to ensure reliable access to electricity. Due to changes in the electrical grid, there now are many sources of power that the health system can rely upon and the power plant is no longer considered necessary. The plant could be sold for $200 million and currently generates annual revenue of $80 million and operating income of $19 million. There is no particular reason to expect these economics to change in the coming years. The board has asked you to opine on the financial value of selling the power plant. The health system has a WACC of 7.6%. What do you recommend?
A) Keep it
B) Sell it
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