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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 gasfired 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 turbinesteam turbine generator. Each power plant will produce power after construction for 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.
Table 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 of tax and straightline depreciation for the lifetime of the plant year to year Assume a discount rate for your company of 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 eg changes in fuel price
Draw the NPV and IRR of a project for fuel price.
Find the fuel price that makes you indifferent between two projects.
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