Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment for the plant is $530 million, spread evenly

An integrated, combined cycle power plant produces 285 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 18 years. Additionally, the plant will operate at full capacity 77% of the time (downtime is 23% of any given year). The MARR is 7% 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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Management

Authors: Eugene F. Brigham, Joel F. Houston

16th Edition

0357517571, 978-0357517574

More Books

Students also viewed these Finance questions