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.