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Regulators of the energy industry are often interested in the costs and benets of different electric- power generation technologies. Here, for example, are a few
Regulators of the energy industry are often interested in the costs and benets of different electric- power generation technologies. Here, for example, are a few hypothetical costs and benefits (in per- year, nominal terms) for four different power-producing technologies: Wind Solar Coal Nuclear Build cost (millions of $): 162 295.5 3,360.5 13,404 Yearly benet (millions of S): 24.5 6.3 114.6 80.7 Lifespan (years): 30 50 40 80 Cleanup cost (millions of $): 5.1 8.55 76.05 500 a) Assuming a real interest rate of 4% (so, r = 0.04), enter these numbers into the \"HW 1 Q3 tool\" spreadsheet and report the NPV of each technology. [2 point] b) Which technology has the highest net present value? Looking at the numbers, including environmental damage and cleanup costs, explain why. [2 points] c) Would nuclear power be a good investment if its cleanup costs were zero (while all other values stayed the same)? Why or why not? [2 points] d) Use Excel's \"Goal Seek\" mction to determine the level of yearly benet at which coal power has an NPV of zero. Then, hypothesize how the relationship between quantity of coal-red electricity and environmental damage would invalidate the estimate. [4 points]
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