An integrated, combined cycle power plant produces 275 MW of electricity by gasifying coal. The capital investment for the plant is $700 million, spread evenly over two years. The operating life of the plant is expected to be 16 years. Additionally, the plant will operate at full capacity 75% of the time (downtime is 25% of any given year). The MARR is 6% per year. a. If this plant will make a profit of three cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable? a. The simple payback period of the plant is years. (Round up to one decimal place.)
An integrated, combined cycle power plant produces 275 MW of electricity by gasifying coal. The capital investment for the plant is $700 million, spread evenly over two years. The operating life of the plant is expected to be 16 years. Additionally, the plant will operate at full capacity 75% of the time (downtime is 25% of any given year). The MARR is 6% per year. a. If this plant will make a profit of three cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable? a. The simple payback period of the plant is years. (Round up to one decimal place.)
Chapter1: Making Economics Decisions
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Transcribed Image Text:An integrated, combined cycle power plant produces 275 MW of electricity by gasifying coal. The capital investment for
the plant is $700 million, spread evenly over two years. The operating life of the plant is expected to be 16 years.
Additionally, the plant will operate at full capacity 75% of the time (downtime is 25% of any given year). The MARR is
6% per year.
a. If this plant will make a profit of three cents per kilowatt-hour of electricity sold to the power grid, what is the simple
payback period of the plant? Is it a low-risk venture?
b. What is the IRR for the plant? Is it profitable?
a. The simple payback period of the plant is years. (Round up to one decimal place.)
It's a
venture.
b. The IRR for the plant is %. (Round to one decimal place.)
The plant is
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