[Solved]- CAPITOL CITY POWER SUPPLY COMPANY FINAL AUDIT CASE
CAPITOL CITY POWER SUPPLY COMPANY FINAL AUDIT
CASE
Capitol
City Power Supply Company (CCPSC) estimated that its new nuclear power plant
started in 2014 will be complete and operational by 2020. However, to date, the
company has capitalized about $875 million in construction costs, which is
beyond its $500 million estimates and the project is approximately 60%
complete. Ideally, the delay has been caused by litigations by individual
groups opposed to the project; thereby, leading to cost overruns. As of now,
the project has been halted due to a shortage of funds to enable its
completion. Nonetheless, the company still has two options on whether to
continue with the project or abandon it. The company s management can issue
$585 million in additional shares of common stock and bond to finance the
completion of the project as authorized by its shareholders or abandon the
project and write off the $875 million already incurred as a loss on its
financial statement. If the management decides to adhere to the shareholders
authorization and is unable to complete and make it operational, the firm might
be forced into bankruptcy. On the other hand, if the power plant is abandoned
at this stage, it could lower the company s shareholder s equity by
approximately 75%, but the firm could be able to survive without being forced
into bankruptcy. Nonetheless, the company s management is dedicated to issuing
bonds and additional common stock shares.
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