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Wind turbine capital investment analysis Central Plains Power Company is considering an investment in wind farm technology to reduce natural gas use. Initial installation costs are expected to be $1,200 per kilowatt-hour of capacity. The wind turbine has a capacity of generating 2 megawatts per hour. A kilowatt-hour is 1,000 watts generated per hour, and a megawatt hour is 1,000 kilowatts generated per hour. Annual operating information related to the wind turbine project was developed as follows: Wind capacity factor   25 %* Operating cost per wind turbine megawatt-hour   $10   Variable operating, fuel, and maintenance costs per natural gas megawatt-hour   $95   Days per year   365     *A factor that measures the reduction from full capacity due to the variability of wind a. Determine the initial investment cost of the wind turbine. b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to nearest whole dollar. c. Determine the net present value of the project assuming a 15-year life and 12% minimum rate of return. (Use the present value tables in Appendix A.)

Wind turbine capital investment analysis Central Plains Power Company is considering an investment in wind farm technology to reduce natural gas use. Initial installation costs are expected to be $1,200 per kilowatt-hour of capacity. The wind turbine has a capacity of generating 2 megawatts per hour. A kilowatt-hour is 1,000 watts generated per hour, and a megawatt hour is 1,000 kilowatts generated per hour. Annual operating information related to the wind turbine project was developed as follows: Wind capacity factor   25 %* Operating cost per wind turbine megawatt-hour   $10   Variable operating, fuel, and maintenance costs per natural gas megawatt-hour   $95   Days per year   365     *A factor that measures the reduction from full capacity due to the variability of wind a. Determine the initial investment cost of the wind turbine. b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to nearest whole dollar. c. Determine the net present value of the project assuming a 15-year life and 12% minimum rate of return. (Use the present value tables in Appendix A.)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Wind turbine capital investment analysis

Central Plains Power Company is considering an investment in wind farm technology to reduce natural gas use. Initial installation costs are expected to be $1,200 per kilowatt-hour of capacity. The wind turbine has a capacity of generating 2 megawatts per hour. A kilowatt-hour is 1,000 watts generated per hour, and a megawatt hour is 1,000 kilowatts generated per hour.

Annual operating information related to the wind turbine project was developed as follows:

Wind capacity factor   25 %*
Operating cost per wind turbine megawatt-hour   $10  
Variable operating, fuel, and maintenance costs per natural gas megawatt-hour   $95  
Days per year   365  

 

*A factor that measures the reduction from full capacity due to the variability of wind

a. Determine the initial investment cost of the wind turbine.

b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to nearest whole dollar.

c. Determine the net present value of the project assuming a 15-year life and 12% minimum rate of return. (Use the present value tables in Appendix A.)

Present Value of Ordinary Annulty of $1 per Perlod Present Value of Ordinary Annulty of $1 per Perlod Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 7% Periods 8% 9% 10% 11% 12% 13% 14% 1 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 1 0.92593 0.91743 0.90909 0.90090 0.89286 0.88496 0.87719 1.85941 2.72325 2 1.88609 1.87267 1.84632 1.83339 1.82063 1.80802 2 1.78326 1.75911 1.73554 1.71252 1.69005 1.66810 1.64666 2.77509 3.62990 2.74896 3.58753 2.57710 3.31213 3.99271 2.32163 2.91371 3.43308 3 2.69793 2.67301 2.64848 2.62432 3 2.53129 2.48685 2.44371 2.40183 2.36115 4 3.54595 3.50515 3.46511 342580 3.38721 4 3.23972 3.16987 3.10245 3.03735 2.97447 5 4.45182 4.38998 4.32948 4.27028 4.21236 4.15568 4.10020 5 3.88965 3.79079 3.69590 3.60478 3.51723 6 5.24214 5.15787 5.07569 4.99553 4.91732 4.84101 4.76654 4.62288 4.48592 4.35526 4.23054 4.11141 3.99755 3.88867 7 6.00205 5.89270 5.78637 5.68297 5.58238 5.48452 5.38929 7 5.20637 5.03295 4.86842 4.71220 4.56376 4.42261 4.28830 6.73274 6.59589 6.46321 6.33457 6.20979 6.08875 5.97130 8 5.74664 5.53482 5.33493 5.14612 4.96764 4.79677 4.63886 7.43533 7.26879 7.10782 6.95220 6.80169 6.65610 6.51523 9 6.24689 5.99525 5.75902 5.53705 5.32825 5.13166 4.94637 10 8.11090 7.91272 7.72173 7.53763 7.36009 7.18883 7.02358 10 6.71008 6.41766 6.14457 5.88923 5.65022 5.42624 5.21612 8.09254 8.61852 9.11708 5.93770 6.19437 5.45273 5.66029 11 8.76048 8.52892 8.30641 7.88687 7.68904 7.49867 11 7.13896 6.80519 6.49506 6.20652 5.68694 8.86325 9.39357 7.94269 8.35765 9.11858 9.68285 10.22283 10.73955 12 9.38507 8.38384 8.15873 12 7.53608 7.16073 6.81369 6.49236 5.91765 7.90378 8.22424 6.42355 6.62817 6.12181 6.30249 6.46238 13 9.98565 8.85268 8.59974 13 7.48690 7.10336 6.74987 5.84236 10.56312 11.11839 8.74547 9.10791 14 9.89864 9.58965 9.29498 9.01384 14 7.78615 7.36669 6.96187 6.00207 15 10.37966 10.03758 9.71225 9.40267 15 8.55948 8.06069 7.60608 7.19087 6.81086 6.14217 11.65230 12.16567 11.23402 11.70719 9.44665 9.76322 10.05909 10.33560 16 10.83777 10.46216 10.10590 9.76776 16 8.85137 8.31256 7.82371 7.37916 6.97399 6.60388 6.26506 17 11.27407 10.86461 10.47726 10.11058 17 9.12164 8.54363 8.02155 7.54879 7.11963 6.72909 6.37286 11.24607 11.60765 18 12.65930 12.15999 11.68959 10.82760 10.43247 18 9.37189 8.75563 8.20141 7.70162 7.24967 6.83991 6.46742 19 13.13394 12.59329 12.08532 11.15812 10.73471 19 9.60360 8.95011 8.36492 7.83929 7.36578 6.93797 6.55037 20 13.59033 13.00794 12.46221 11.95038 11.46992 11.01851 10.59401 20 9.81815 9.12855 8.51356 7.96333 7.46944 7.02475 6.62313 21 14.02916 13.40472 12.82115 12.27524 11.76408 11.28498 10.83553 21 10.01680 9.29224 8.64869 8.07507 7.56200 7.10155 6.68696 22 14.45112 13.78442 13.16300 12.58317 12.04158 11.53520 11.06124 22 10.20074 9.44243 8.77154 8.17574 7.64465 7.16951 6.74294 23 14.85684 14.14777 13.48857 12.87504 12.30338 11.77014 11.27219 23 10.37106 9.58021 8.88322 8.26643 7.71843 7,22966 6.79206 15.24696 15.62208 14.49548 14.82821 13.79864 14.09394 13.15170 13.41393 11.99074 12.19788 11.46933 11.65358 24 12.55036 24 10.52876 9.70661 8.98474 8.34814 7.78432 7.28288 6.83514 25 12.78336 25 10.67478 9.82258 9.07704 8.42174 7.84314 7.32998 6.87293 26 15.98277 15.14661 14.37519 13.66250 13.00317 12.39237 11.82578 26 10.80998 9.92897 9.16095 8.48806 7.89566 7.37167 6.90608 10.93516 11.05108 27 16.32959 15.45130 14.64303 13.89810 13.21053 12.57500 11.98671 27 10.02658 9.23722 8.54780 7.94255 7.40856 6.93515 14.12142 14.33310 14.53375 28 16.66306 15.74287 14.89813 13.40616 12.74648 12.13711 28 10.11613 9.30657 8.60162 7.98442 7.44120 6.96066 29 16.98371 16.02189 15.14107 13.59072 12.90749 12.27767 29 11.15841 10.19828 9.36961 8.65011 8.02181 7.47009 6.98304 30 17.29203 16.28889 15.37245 13.76483 13.05868 12.40904 30 11.25778 10.27365 9.42691 8.055 18 8.69379 7.49565 7.00266 16.54439 16.78889 17.02286 14.72393 14.90420 13.20063 13.33393 1345909 13.57661 13.68696 12.53181 12.64656 17.58849 13.92909 14.08404 14.23023 14.36814 7.51828 7.53830 7.55602 31 15.59281 31 11.34980 10.34280 9.47901 8.73315 8.08499 7.01988 15.80268 16.00255 32 17.87355 32 11.43500 10.40624 9.52638 8.76860 8.11159 7.03498 18.14765 18.41120 18.66461 12.75379 12.85401 10.46444 10.51784 33 15.07507 33 11.51389 9.56043 8.80054 8.13535 7.04823 15.23703 15.39055 8.15656 8.17550 34 17.24676 16.19290 34 11.58693 9.60857 8.82932 7.57170 7.05985 35 17.46101 16.37419 14.49825 12.94767 35 11.65457 10.56682 9.64416 8.85524 7.58557 7.07005 40 19.79277 18.40158 17.15909 16.04612 15.04630 14.14553 13.33171 40 11.92461 10.75736 9.77905 8.95105 8.24378 7.63438 7.10504 45 20.72004 19.15635 17.77407 16.54773 15.45583 14.48023 13.60552 45 12.10840 10.88120 9.86281 9.00791 8.28252 7.66086 7.12322 50 21.48218 19.76201 18.25593 16.93152 15.76186 14.72452 13.80075 50 12.23348 10.96168 9.91481 9.04165 8.30450 7.67524 7.13266
Transcribed Image Text:Present Value of Ordinary Annulty of $1 per Perlod Present Value of Ordinary Annulty of $1 per Perlod Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 7% Periods 8% 9% 10% 11% 12% 13% 14% 1 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458 1 0.92593 0.91743 0.90909 0.90090 0.89286 0.88496 0.87719 1.85941 2.72325 2 1.88609 1.87267 1.84632 1.83339 1.82063 1.80802 2 1.78326 1.75911 1.73554 1.71252 1.69005 1.66810 1.64666 2.77509 3.62990 2.74896 3.58753 2.57710 3.31213 3.99271 2.32163 2.91371 3.43308 3 2.69793 2.67301 2.64848 2.62432 3 2.53129 2.48685 2.44371 2.40183 2.36115 4 3.54595 3.50515 3.46511 342580 3.38721 4 3.23972 3.16987 3.10245 3.03735 2.97447 5 4.45182 4.38998 4.32948 4.27028 4.21236 4.15568 4.10020 5 3.88965 3.79079 3.69590 3.60478 3.51723 6 5.24214 5.15787 5.07569 4.99553 4.91732 4.84101 4.76654 4.62288 4.48592 4.35526 4.23054 4.11141 3.99755 3.88867 7 6.00205 5.89270 5.78637 5.68297 5.58238 5.48452 5.38929 7 5.20637 5.03295 4.86842 4.71220 4.56376 4.42261 4.28830 6.73274 6.59589 6.46321 6.33457 6.20979 6.08875 5.97130 8 5.74664 5.53482 5.33493 5.14612 4.96764 4.79677 4.63886 7.43533 7.26879 7.10782 6.95220 6.80169 6.65610 6.51523 9 6.24689 5.99525 5.75902 5.53705 5.32825 5.13166 4.94637 10 8.11090 7.91272 7.72173 7.53763 7.36009 7.18883 7.02358 10 6.71008 6.41766 6.14457 5.88923 5.65022 5.42624 5.21612 8.09254 8.61852 9.11708 5.93770 6.19437 5.45273 5.66029 11 8.76048 8.52892 8.30641 7.88687 7.68904 7.49867 11 7.13896 6.80519 6.49506 6.20652 5.68694 8.86325 9.39357 7.94269 8.35765 9.11858 9.68285 10.22283 10.73955 12 9.38507 8.38384 8.15873 12 7.53608 7.16073 6.81369 6.49236 5.91765 7.90378 8.22424 6.42355 6.62817 6.12181 6.30249 6.46238 13 9.98565 8.85268 8.59974 13 7.48690 7.10336 6.74987 5.84236 10.56312 11.11839 8.74547 9.10791 14 9.89864 9.58965 9.29498 9.01384 14 7.78615 7.36669 6.96187 6.00207 15 10.37966 10.03758 9.71225 9.40267 15 8.55948 8.06069 7.60608 7.19087 6.81086 6.14217 11.65230 12.16567 11.23402 11.70719 9.44665 9.76322 10.05909 10.33560 16 10.83777 10.46216 10.10590 9.76776 16 8.85137 8.31256 7.82371 7.37916 6.97399 6.60388 6.26506 17 11.27407 10.86461 10.47726 10.11058 17 9.12164 8.54363 8.02155 7.54879 7.11963 6.72909 6.37286 11.24607 11.60765 18 12.65930 12.15999 11.68959 10.82760 10.43247 18 9.37189 8.75563 8.20141 7.70162 7.24967 6.83991 6.46742 19 13.13394 12.59329 12.08532 11.15812 10.73471 19 9.60360 8.95011 8.36492 7.83929 7.36578 6.93797 6.55037 20 13.59033 13.00794 12.46221 11.95038 11.46992 11.01851 10.59401 20 9.81815 9.12855 8.51356 7.96333 7.46944 7.02475 6.62313 21 14.02916 13.40472 12.82115 12.27524 11.76408 11.28498 10.83553 21 10.01680 9.29224 8.64869 8.07507 7.56200 7.10155 6.68696 22 14.45112 13.78442 13.16300 12.58317 12.04158 11.53520 11.06124 22 10.20074 9.44243 8.77154 8.17574 7.64465 7.16951 6.74294 23 14.85684 14.14777 13.48857 12.87504 12.30338 11.77014 11.27219 23 10.37106 9.58021 8.88322 8.26643 7.71843 7,22966 6.79206 15.24696 15.62208 14.49548 14.82821 13.79864 14.09394 13.15170 13.41393 11.99074 12.19788 11.46933 11.65358 24 12.55036 24 10.52876 9.70661 8.98474 8.34814 7.78432 7.28288 6.83514 25 12.78336 25 10.67478 9.82258 9.07704 8.42174 7.84314 7.32998 6.87293 26 15.98277 15.14661 14.37519 13.66250 13.00317 12.39237 11.82578 26 10.80998 9.92897 9.16095 8.48806 7.89566 7.37167 6.90608 10.93516 11.05108 27 16.32959 15.45130 14.64303 13.89810 13.21053 12.57500 11.98671 27 10.02658 9.23722 8.54780 7.94255 7.40856 6.93515 14.12142 14.33310 14.53375 28 16.66306 15.74287 14.89813 13.40616 12.74648 12.13711 28 10.11613 9.30657 8.60162 7.98442 7.44120 6.96066 29 16.98371 16.02189 15.14107 13.59072 12.90749 12.27767 29 11.15841 10.19828 9.36961 8.65011 8.02181 7.47009 6.98304 30 17.29203 16.28889 15.37245 13.76483 13.05868 12.40904 30 11.25778 10.27365 9.42691 8.055 18 8.69379 7.49565 7.00266 16.54439 16.78889 17.02286 14.72393 14.90420 13.20063 13.33393 1345909 13.57661 13.68696 12.53181 12.64656 17.58849 13.92909 14.08404 14.23023 14.36814 7.51828 7.53830 7.55602 31 15.59281 31 11.34980 10.34280 9.47901 8.73315 8.08499 7.01988 15.80268 16.00255 32 17.87355 32 11.43500 10.40624 9.52638 8.76860 8.11159 7.03498 18.14765 18.41120 18.66461 12.75379 12.85401 10.46444 10.51784 33 15.07507 33 11.51389 9.56043 8.80054 8.13535 7.04823 15.23703 15.39055 8.15656 8.17550 34 17.24676 16.19290 34 11.58693 9.60857 8.82932 7.57170 7.05985 35 17.46101 16.37419 14.49825 12.94767 35 11.65457 10.56682 9.64416 8.85524 7.58557 7.07005 40 19.79277 18.40158 17.15909 16.04612 15.04630 14.14553 13.33171 40 11.92461 10.75736 9.77905 8.95105 8.24378 7.63438 7.10504 45 20.72004 19.15635 17.77407 16.54773 15.45583 14.48023 13.60552 45 12.10840 10.88120 9.86281 9.00791 8.28252 7.66086 7.12322 50 21.48218 19.76201 18.25593 16.93152 15.76186 14.72452 13.80075 50 12.23348 10.96168 9.91481 9.04165 8.30450 7.67524 7.13266
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