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.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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