Question
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?
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