Engineering Economy and Cost Analysis
Case Study - Term Project
Read the case entitled "USEC INC" and answer the following questions:
1. Why USEC pursuing the ACP?
2. What is the net present value of the ACP currently implied by the stock market?
3. What is USEC's weighted-average cost of capital (WACC) in July 2006? Are you comfortable with using this discount rate for the ACP? Explain.
4. Using the financial data in the case, what is your estimate of the American Centrifuge Project's NPV? What are the key value drivers in your estimate? Use a sensitivity analysis to illustrate how much the NPV varies for reasonable changes of the key driver inputs.
5. Is Mackovjak correct to ignore that the market value of USEC's inventory of uranium exceeds its book value? Explain.
6. Based on your analysis, would you recommend that Rivanna Capital take a long, short, or not position in USEC's stock? Explain.