10.38 An international manufacturer of prepared food items needs 50,000,000 kWh of electrical energy a year, with a maximum demand of 10,000 kW. The local utility company currently charges $0.085 per kWha rate considered high throughout the industry. Because the firms 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.

Table P10.38 (Note the data in table 10.38 needs to be multiplied by 1000.)

Table P10.38 Full Alternative Text

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 firms MARR is known to be 12%. The firms marginal income tax rate is 25%.

1. Determine the unit power cost ($/kWh) for each plant.

2. Which plant would provide the most economical power?

Table P10.38 Plant A $16,500 $8,530 Plant B $14,500 $9,498 Plant C $13,000 $10,546 Average station heat rate (BTU/kWh) Total investment (boiler/turbine/electricall structures) Annual operating cost: Fuel $930 $828 $616 Labor O&M $1,128 $616 $150 $60 $10 $616 $126 $60 $12 Supplies Insurance and property taxes $114 $60 $14 Table P10.38 Plant A $16,500 $8,530 Plant B $14,500 $9,498 Plant C $13,000 $10,546 Average station heat rate (BTU/kWh) Total investment (boiler/turbine/electricall structures) Annual operating cost: Fuel $930 $828 $616 Labor O&M $1,128 $616 $150 $60 $10 $616 $126 $60 $12 Supplies Insurance and property taxes $114 $60 $14