7.5 Syldavia Energy is exploring the possibility of building a new 600-MW power plant. Given the parameters shown in the table below, which technology should it adopt for this plant, assuming that the plant would have a utilization factor of 0.80 and would be able to sell its output at an average price of 30 $/MWh? Syldavia Energy uses a Minimum Acceptable Rate of Return of 12%.

Technology A

Technology B

Investment cost

1100 $/kW

650 $/kW

Expected plant life

30 years

30 years

Heat rate at rated output

7500 Btu/kWh

6500 Btu/kWh

Expected fuel cost

1.15 $/MBtu

2.75 $/MBtu

7.6 Borduria Power has built a plant with the following characteristics:

Investment cost

1000 $/kW

Capacity

400 MW

Expected plant life

30 years

Heat rate at rated output

9800 Btu/kWh

Expected fuel cost

1.10 $/MBtu

Expected utilization factor

0.85

Expected average selling price

31 $/MWh

After five years of operation, market conditions change dramatically. The fuel price increases to 1.50 $/MBtu, the utilization factor drops to 0.45 and the aver- age price at which Borduria Power can sell the energy produced by this plant drops to 25 $/MWh.

What should Borduria Power do with this plant? What should Borduria Power have done if it had known about this change in market conditions? Assume that Borduria Power uses a MARR of 12% and ignore the recoverable cost of the plant.