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Question 1 Not yet answered Points out of 18.00 Flag question We are an electric utility company that is going to build a new power plant. We are choosing between a coal-fired power plant and a natural gas-fired power plant. The coal-fired power plant will be based on a pulverized coal wall-fired furnace with supercritical steam cycle, and will burn a high sulfur bituminous coal. The coal power plant will have low NOx burners, overfire air, selective catalytic reduction, electrostatic precipitation, and flue gas desulfurization. The natural gas fired power plant will be based on a steam-cooled heavy-duty gas turbine combined cycle design, with selective catalytic reduction for NOx control. The estimated service life of the coal-fired power plant is 50 years. The estimated service life of the gas turbine combined cycle plant is 50 years. We will use a planning horizon of 50 years. Both power plants are designed to be 500 MW capacity. The coal power plant has an initial capital cost of $1,000 million, an annual maintenance cost of $24 million per year that increase 2% a year, an annual fuel cost of $48.345 million per year, and a salvage value of $40 million at the end of 50 years. The coal power plant will generate 2.41 billion kWh of electricity each year, which will bring in electricity revenue of $156.59 million per year. The natural gas fired power plant has an initial capital cost of $300.0 million, maintenance cost of $4.5 million per year that increase $500,000 a year, an annual fuel cost of $54.075 million per year, and no salvage value. The natural gas power plant will generate 2.63 billion kWh of electricity each year, which will bring in electricity revenue of $170.82 million per year. For the following questions, use an interest rate of 10 percent, compounded annually. For this problem, report your answer in terms of millions of dollars with two decimal places (e.g., 26,520,000 would be entered as 26.52). (a). (5 pts) For the coal power plant, what is the present value of the 1. maintenance cost ($) 2. fuel cost (\$) 3. electricity revenue ($) 4. and salvage value ($) 5. based on these costs, what is the net present worth in terms of benefits minus costs ($) ? (b). (5 pts) For the natural gas power plant, what is the present value of the 1. maintenance cost (\$) 2. fuel cost (\$) 3. electricity revenue (\$) 4. and salvage value (\$) 5. based on these costs, what is the net present worth in terms of benefits minus costs ($) ? (c). (3 pts) For the coal power plant, what is the: 1. EUAC? 2. EUAB? 3. EUAW? (d). (3 pts) For the natural gas power plant, what is the: 1. EUAC? 2. EUAB? 3. EUAW? (e). (2 pts) Which power plant is the best choice from an economic perspective? \begin{tabular}{|c|c|c|c|c|c|} \hline & Coal Power Plant & Natural Gas Power Plant & Question & Work & \\ \hline Lifetime (years) & 50 & 50 & A1) & 24[(P/A,(1.1/1.02)1,50 years )/1.02]= & 294.60 \\ \hline Initial cost (\$ Millions) & 1000 & 300 & A2) & 48.35(P/A,0.10,50)= & 479.39 \\ \hline Initial annual Maintenance Cost (\$ Millions) & 24 & 4.5 & A3) & 156.54(P/F,0.10,50)= & 1552.56 \\ \hline Geometric Maintennace Gradient & 0.02 & N/A & A4) & 40(P/F,0.10,50)= & 3.408 \\ \hline Arithmetic Maintennace Gradient & N/A & 0.5 & A5) & 1552.56+3.408294.60479.391000= & -218.022 \\ \hline Annual Fuel Cost ( $ Millions) & 48.345 & 54.075 & B1) & 4.5(P/A,0.10,50)+0.5(P/G,0.10,50)= & 92.062 \\ \hline Salvage Value (\$ Millions) & 40 & 0 & B2) & 54.705(P/A,0.10,50)= & 542.40 \\ \hline Power Generated (billion kWh) & 2.41 & 2.63 & B3) & 170.82(P/A,0.10,50)= & 1693.68 \\ \hline Annual Revenue (\$ Millions) & 156.59 & 170.82 & B4) & No Salvage Value = & 0.00 \\ \hline Maintenance Cost Present Value & 293.1214708 & 139.5055344 & B5) & 1693.68300542.0292.062= & 759.598 \\ \hline Fuel Cost Present Value & 479.3317064 & 536.1435934 & C1) & 1000(A/P,0.10,50)+24(P/A,0.02,0.10,50)(A/P,0.10,50)+48.345= & 149.488 \\ \hline Electricity Revenue Present Value & 1552.560801 & 1693.648611 & C2) & 40(A/F,0.10,50)+156.54= & 156.884 \\ \hline Salvage Present Value & 0.3407420512 & 0 & C3) & EAUW=EAUBEAUC= & 7.396 \\ \hline Interest & 0.1 & 0.1 & D1) & & \\ \hline \multirow[t]{3}{*}{ Lifetime (years) } & 50 & 50 & D2) & & \\ \hline & & & D3) & & \\ \hline & & & E) & & \\ \hline \end{tabular} Redo Problem \#1 for the coal fired power plant by creating cash flows as rows in Excel. You should have 50 rows representing fifty years. Aggregate benefits and costs separately and convert all yearly cash flows to present values. Sum Costs and benefits and check your answers in Problem 1. Then, use your spreadsheet to answer the following questions. (Hint: if you need goal seek, see Excel lecture posted in Module 1 or online tutorials). These scenarios are not cumulative. Go back to your original spreadsheet for each one. (a). (2 pts) What would change the Present Worth more: decreasing maintenance costs to a 1% gradient or cutting fuel costs by 5% throughout all 50 years? (b.) (2 pts) What maintenance gradient do you need to lower your Present Worth to $100M ? Report as a percentage value rounded to two decimal places (report 2.34% as 2.34 , NOT 0.0234 ). (c.) (2 pts) What annual revenues do you need to make your present worth break even (i.e., \$0)? Report your answer in terms of millions of dollars