Explain approval for the construction of a new nuclear plant

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Reference no: EM13109416

The board of directors of New England Authority has given approval for the construction of a new nuclear power plant. The plant will want an investment of $250 million. The essential funds will come from the sale of a proposed bond issue and loans from two insurance companies. Sponsors in New York have informed New England Power Plant that it will not be able to sell more than $100 million in bonds at the proposed coupon rate of 12%. Insurance company A will loan up to $200 million at an interest rate of 14% however insists that the amount of bond plus the amount owed to insurance company B be no more than twice the amount owed to insurance company A. Insurance company B will loan an amount equal to the amount loaned by insurance company A but at a rate of 16%

Reference no: EM13109416

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