Contemporary Engineering Economics (6th Edition)
Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 6, Problem 31P
To determine

Calculate the cost per mile.

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A company is currently paying its employees$0.56 per mile to drive their own cars on companybusiness. The company is considering supplyingemployees with cars, which would involve purchasing at $25,000 with an estimated three-year life, a netsalvage value of $8,000, taxes and insurance at a costof $1,200 per year, and operating and maintenanceexpenses of $0.30 per mile. If the interest rate is 10%and the company anticipates an employee’s annualtravel to be 30,000 miles, what is the equivalent costper mile (neglecting income taxes)
An integrated, combined cycle power plant produces 290 MW of electricity by gasifying coal. The capital investment for the plant is $530 million, spread evenly over two years. The operating life of the plant is expected to be 15 years. Additionally, the plant will operate at full capacity 74% of the time (downtime is 26% of any given year). The MARR is 5% 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?
An integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment for the plant is $450 million, spread evenly over two years. The operating life of the plant is expected to be 18 years. Additionally, the plant will operate at full capacity 76% of the time (downtime is 24% of any given year). The MARR is 10% per year. a. If this plant will make a profit of two 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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