second steam turbine that generates additional electricity. A 968-megawatt combined-cycle gas fired plant can be purchased for P450 million, has no salvage value, and produces a net cash flow (revenues less exp
second steam turbine that generates additional electricity. A 968-megawatt combined-cycle gas fired plant can be purchased for P450 million, has no salvage value, and produces a net cash flow (revenues less exp
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
100%
Combined-cycle power plants use two combustion turbines to produce
electricity. Heat from the first turbine’s exhaust is captured to heat
water and produce steam sent to a second steam turbine that
generates additional electricity. A 968-megawatt combined-cycle gas
fired plant can be purchased for P450 million, has no salvage value,
and produces a net cash flow (revenues less expenses) of P50 million
per year over its expected 30-year life.
a. If the hurdle rate (MARR) is 14% per year, how profitable an
investment is this power plant?
b. What is the simple payback period for the plant? Is this investment
acceptable?
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