A California utility firm is considering buildinga 50-megawatt geothermal plant that generates electricity from naturally occurring underground heat.The binary geothermal system will cost $85 million tobuild and $6 million (including any income-tax effect)to operate per year. (Virtually no fuel costs will accrueM06_PARK9091_06_GE_C06.indd 337 10/22/15 5:13 PM338 Chapter 6 Annual Equivalent-Worth Analysiscompared with fuel costs related to a conventionalfossil-fuel plant.) The geothermal plant is to last for25 years. At that time, its expected salvage value willbe about the same as the cost to remove the plant. Theplant will be in operation for 70% (plant utilizationfactor) of the year (or 70% of 8,760 hours per year). Ifthe firm’s MARR is 14% per year, determine the costper kilowatt-hour of generating electricity
A California utility firm is considering building
a 50-megawatt geothermal plant that generates electricity from naturally occurring underground heat.
The binary geothermal system will cost $85 million to
build and $6 million (including any income-tax effect)
to operate per year. (Virtually no fuel costs will accrue
M06_PARK9091_06_GE_C06.indd 337 10/22/15 5:13 PM
338 Chapter 6 Annual Equivalent-Worth Analysis
compared with fuel costs related to a conventional
fossil-fuel plant.) The geothermal plant is to last for
25 years. At that time, its expected salvage value will
be about the same as the cost to remove the plant. The
plant will be in operation for 70% (plant utilization
factor) of the year (or 70% of 8,760 hours per year). If
the firm’s MARR is 14% per year, determine the cost
per kilowatt-hour of generating electricity
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