Please help!!!!
Case study:
A prominent global city design company, BRD, is planning to design and build a model city of the future from the ground up. As a leader in the business world, BRD has in-house R&D capacity across multiple engineering disciplines civil, industrial, mechanical, and software, as well as computer science. This brings unlimited access to expertise in every engineering plan/design. To support this grand project, BRD has set aside $20 billion for initial launch and has committed to allocate an additional annual budget up to $300 million for the next 30 years till the city becomes financially viable. The owner of BRD, Mr. Smith, has an overarching vision for the "city of future", which is to demonstrate a life style on the basis of respect for life and nature. To support this vision, he has specific criteria. The first one is The city should be self-sustained in energy Mr. Smith believes the importance of renewable energy. Three renewable energy sources were discussed: solar, wind, and hydro, with some supplementary biomass. Natural gas or other fossil fuel has been excluded for its non-renewable character and its permanent negative environmental impact. Such a criterion has profound implications to the site selection - is it better to select a desert area with abundant solar energy, a hilly/plateau region with abundant wind energy, or a place with abundant hydro energy source? (This question forms the basis of Part 1 of Case Study, presented in a separate file with further details.) It is well-known that renewable energy tends to be intermittent at different times; therefore, supplementary resources or mechanisms will be needed to operate the overall energy system reliably. Electric storage/battery system and demand response resources (meaning various mechanisms to allow curtailment of electricity consumption) have been considered as the part of critical infrastructure to balance power supply and demand. Also, hydro power is considered as a natural storage system to cushion intermittency of renewables. The general framework of power system solution will be a smart grid, which is essentially a dynamic supply-demand balancing mechanism enabled by extensive use of computers, communications, and control technologies at every aggregation level. Under this framework, the hope is that individual energy consumers (person or organization) will be motived to save energy. The development of the "city of future" is extremely complex. During the project, Mr. Smith anticipates exploring additional planning, design criteria and development considerations, such as urban planning and construction, pavement comparison, smart traffic control, comparison with overpass, and strategic autonomous vehicles. Site Selection Decision based on P-F-A Analysis After extended research and investigations, there are two locations that stand out as the top candidates for site selection - AAA, a piece of land in remote desert and BBB, a piece of land on mountain plateau. AAA is available for purchase at very low price since it is a nearly barren piece of land. Also, various innovative technologies/solutions can be applied and tested in this condition. A big advantage of this location is the extreme abundance in solar energy. However, it will be challenging to build nearly everything from scratch. Thus, it is expected that this location would require high initial costs for infrastructures and high recurring operation and maintenance costs due to the shortage of and far distance from life supporting resources (e.g., water, fertile farming land and etc.). In addition, significant transportation costs will be needed to enable this city to reach the designed scale and population density. The state is interested in having this parcel of land developed to increase the tax base. Therefore, they are offering an incentive to any organization that can develop and maintain the area for an extended period of time. BBB is located in a relatively more populated region with easier access to various resources. Consequently, land is substantially more expensive. Additionally, current residents of the location will need to be paid to relocate or incorporated into the new city. Residents selecting to become part of the new city provide the foundational population and work force (e.g., availability of man power for industry and service sectors). BBB's location has both abundant wind and some hydro resources. The hydro resources is adequate to cushion wind intermittency but not enough to meet all energy needs by itself. Clean and sufficient water is available for both residential and industrial consumption. Given its location in a residential area the EPA is interested in establishing a research facility at BBB. Therefore, they are willing to pay developers an annual rental fee for research space at the location BBB. Another major concern of Mr. Smith is to minimize the city's impact on the environment. Therefore, he has established a goal of having zero impact on water quality and minimizing physical waste. To achieve the water quality goal, a large water treatment system will be built during the initial phase of construction. In addition, to address the physical waste a sophisticated garbage recycling and treatment system will be needed. As part of the recycling program an educational component will be developed for the entire population. The following two tables capture the major factors: Table 1 shows site-independent plan and Table 2 lists site-specific data. By nature, many of the numbers are rough estimates. Table 1. Basic planning parameters Budget $20B Planning 30 years Horizon Planned city 50,000 persons, or 10,000 families population Interest Annual Period Interest rate There are three school of thoughts: (i) As BRD has set aside $20B, we may consider the money as "Free Money". (ii) BRD is a very profitable company, and its rates of return for different lines of business have been consistently above 10%, which we can think of setting MARR at 10%. (iii) As this is not a typical business, we can use the mean of (i) and (ii), thus 5% as the MARR. Table 2. Site specific cost information Unit: $Million AAA BBB Costs for Land Purchase and Relocation Initial 100 480 Solar Farm Initial 100 Recurring 5 Ending 50 Wind Farm Initial 50 Recurring 10 Ending 30 One-time turbine 40 maintenance at year 15 Hydro Dam Initial 300 Recurring 10 Ending 130 Initial 550 275 Water/Food Supply and Transportation Recurring 60 30 Ending 200 100 State Incentive Fund One-time at year 15 20 Recurring 1 EPA Regional Research Space Rental Fee Problem: Mr. Smith would like you to explore the impact of three interest rate options on the final site selection. Based on information provided above, please provide Mr. Smith with analyses of total location cost with respect to interest rates. Also, include your final site recommendation with justification. Suggestion: Draw cash flow diagram before performing any quantitative analysis. Submission: Submit a single word or PDF document to blackboard by Sunday night. Only one submission per team. Well formatted report with the following Problem description Inclusion of any assumptions made Appropriate calculations and CFD (Cash Flow Diagram) for all options Conclusion with discussion and supporting evidence A prominent global city design company, BRD, is planning to design and build a model city of the future from the ground up. As a leader in the business world, BRD has in-house R&D capacity across multiple engineering disciplines civil, industrial, mechanical, and software, as well as computer science. This brings unlimited access to expertise in every engineering plan/design. To support this grand project, BRD has set aside $20 billion for initial launch and has committed to allocate an additional annual budget up to $300 million for the next 30 years till the city becomes financially viable. The owner of BRD, Mr. Smith, has an overarching vision for the "city of future", which is to demonstrate a life style on the basis of respect for life and nature. To support this vision, he has specific criteria. The first one is The city should be self-sustained in energy Mr. Smith believes the importance of renewable energy. Three renewable energy sources were discussed: solar, wind, and hydro, with some supplementary biomass. Natural gas or other fossil fuel has been excluded for its non-renewable character and its permanent negative environmental impact. Such a criterion has profound implications to the site selection - is it better to select a desert area with abundant solar energy, a hilly/plateau region with abundant wind energy, or a place with abundant hydro energy source? (This question forms the basis of Part 1 of Case Study, presented in a separate file with further details.) It is well-known that renewable energy tends to be intermittent at different times; therefore, supplementary resources or mechanisms will be needed to operate the overall energy system reliably. Electric storage/battery system and demand response resources (meaning various mechanisms to allow curtailment of electricity consumption) have been considered as the part of critical infrastructure to balance power supply and demand. Also, hydro power is considered as a natural storage system to cushion intermittency of renewables. The general framework of power system solution will be a smart grid, which is essentially a dynamic supply-demand balancing mechanism enabled by extensive use of computers, communications, and control technologies at every aggregation level. Under this framework, the hope is that individual energy consumers (person or organization) will be motived to save energy. The development of the "city of future" is extremely complex. During the project, Mr. Smith anticipates exploring additional planning, design criteria and development considerations, such as urban planning and construction, pavement comparison, smart traffic control, comparison with overpass, and strategic autonomous vehicles. Site Selection Decision based on P-F-A Analysis After extended research and investigations, there are two locations that stand out as the top candidates for site selection - AAA, a piece of land in remote desert and BBB, a piece of land on mountain plateau. AAA is available for purchase at very low price since it is a nearly barren piece of land. Also, various innovative technologies/solutions can be applied and tested in this condition. A big advantage of this location is the extreme abundance in solar energy. However, it will be challenging to build nearly everything from scratch. Thus, it is expected that this location would require high initial costs for infrastructures and high recurring operation and maintenance costs due to the shortage of and far distance from life supporting resources (e.g., water, fertile farming land and etc.). In addition, significant transportation costs will be needed to enable this city to reach the designed scale and population density. The state is interested in having this parcel of land developed to increase the tax base. Therefore, they are offering an incentive to any organization that can develop and maintain the area for an extended period of time. BBB is located in a relatively more populated region with easier access to various resources. Consequently, land is substantially more expensive. Additionally, current residents of the location will need to be paid to relocate or incorporated into the new city. Residents selecting to become part of the new city provide the foundational population and work force (e.g., availability of man power for industry and service sectors). BBB's location has both abundant wind and some hydro resources. The hydro resources is adequate to cushion wind intermittency but not enough to meet all energy needs by itself. Clean and sufficient water is available for both residential and industrial consumption. Given its location in a residential area the EPA is interested in establishing a research facility at BBB. Therefore, they are willing to pay developers an annual rental fee for research space at the location BBB. Another major concern of Mr. Smith is to minimize the city's impact on the environment. Therefore, he has established a goal of having zero impact on water quality and minimizing physical waste. To achieve the water quality goal, a large water treatment system will be built during the initial phase of construction. In addition, to address the physical waste a sophisticated garbage recycling and treatment system will be needed. As part of the recycling program an educational component will be developed for the entire population. The following two tables capture the major factors: Table 1 shows site-independent plan and Table 2 lists site-specific data. By nature, many of the numbers are rough estimates. Table 1. Basic planning parameters Budget $20B Planning 30 years Horizon Planned city 50,000 persons, or 10,000 families population Interest Annual Period Interest rate There are three school of thoughts: (i) As BRD has set aside $20B, we may consider the money as "Free Money". (ii) BRD is a very profitable company, and its rates of return for different lines of business have been consistently above 10%, which we can think of setting MARR at 10%. (iii) As this is not a typical business, we can use the mean of (i) and (ii), thus 5% as the MARR. Table 2. Site specific cost information Unit: $Million AAA BBB Costs for Land Purchase and Relocation Initial 100 480 Solar Farm Initial 100 Recurring 5 Ending 50 Wind Farm Initial 50 Recurring 10 Ending 30 One-time turbine 40 maintenance at year 15 Hydro Dam Initial 300 Recurring 10 Ending 130 Initial 550 275 Water/Food Supply and Transportation Recurring 60 30 Ending 200 100 State Incentive Fund One-time at year 15 20 Recurring 1 EPA Regional Research Space Rental Fee Problem: Mr. Smith would like you to explore the impact of three interest rate options on the final site selection. Based on information provided above, please provide Mr. Smith with analyses of total location cost with respect to interest rates. Also, include your final site recommendation with justification. Suggestion: Draw cash flow diagram before performing any quantitative analysis. Submission: Submit a single word or PDF document to blackboard by Sunday night. Only one submission per team. Well formatted report with the following Problem description Inclusion of any assumptions made Appropriate calculations and CFD (Cash Flow Diagram) for all options Conclusion with discussion and supporting evidence
