Question
Conduct a benefit-cost analysis of the project using 3.125 as a measure of the benefits that the project provides and which considers the following costs
Conduct a benefit-cost analysis of the project using "3.125" as a measure of the benefits that the project provides and which considers the following costs (all in millions of US$); and assumes that the project has an operating life of 30 years:
Capital costs (land purchase, construction, machinery, etc.), the power station will take 5 years to build with power generation starting in Year 6;
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
---|---|---|---|---|---|---|---|---|---|---|
Capital cost | 3.2 | 310 | 375 | 450 | 185 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
Operating costs US$27.5 million p.a. beginning in Year 6;
Fuel costs assume that a tonne of coal has a price of $72 and that the station will consume 5,000,000 tonnes of coal p.a.;
Use a discount rate of 6%.
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