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Your company is planning to construct a gas - fired power plant in the Philadelphia area. They are considering one of the two following options,

Your company is planning to construct a gas-fired power plant in the Philadelphia area. They are considering one of the two following options, a Rolls Royce simple cycle gas turbine generator and a
General Electric combined cycle gas turbine/steam turbine generator. Each power plant will produce power after construction for 30 years. Details on the power plant costs, capabilities, and heat rat
are included in the table below. The price of natural gas in the future is uncertain.
Table1. Power Plant Financial and Operating Expenses
[IN IMAGE]
Compare these options in terms of NPV and IRR over the range of possible gas prices. Costs include annual fixed and variable O&M, fuel, and emission permits. Revuene comes from electricity sales.
Consider 25% of tax and straight-line depreciation for the lifetime of the plant (year 1 to year 30). Assume a discount rate for your company of 8%. Explain the results of your analysis in a memo, and
make a recommendation. Should your company pursue a particular option, the alternative, or neither? Describe what kinds of changes to the provided assumptions would change your
recommendation (e.g. changes in fuel price).
1) Draw the NPV and IRR of a project for fuel price.
2) Find the fuel price that makes you indifferent between two projects.
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