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Plant A Plant B Plant C Average Station Heat Rate (BTU/kwh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?

Plant A Plant B Plant C Average Station Heat Rate (BTU/kwh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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10.38An international manufacturer of prepared food items needs 50,000,000 kWh of electrical energy a year, with a maximum demand of 10,000kW. The local utility company currently charges $0.085 per kWh-a rate considered high throughout the industry. Because the firm's power consumption is so large, its engineers are considering installing a 10,000-kW steam-turbine plant. Three types of plant have been proposed (units in thousands of dollars) and are given in Table P10.38 D
Transcribed Image Text:10.38An international manufacturer of prepared food items needs 50,000,000 kWh of electrical energy a year, with a maximum demand of 10,000kW. The local utility company currently charges $0.085 per kWh-a rate considered high throughout the industry. Because the firm's power consumption is so large, its engineers are considering installing a 10,000-kW steam-turbine plant. Three types of plant have been proposed (units in thousands of dollars) and are given in Table P10.38 D
Plant A Plant B Plant C Average Station Heat Rate (BTU/kWh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?
Transcribed Image Text:Plant A Plant B Plant C Average Station Heat Rate (BTU/kWh) 16500 14500 13000 Total investment (boiler/turbine/electrical/ structures) $8.530 $9,498 $10,546 Annual operating cost: Fuel $1,128 $930 $828 Labor $616 $616 $616 O&M $150 $126 $114 Supplies $60 $60 $60 Insurance and property taxes $10 $12 $14 The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm's MARR is known to be 12%. The firm's marginal income tax rate is 25%. a. Determine the unit power cost ($/kWh) for each plant. b. Which plant would provide the most economical power?
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