Your team is to provide an economic evaluation based on a budget developed from costs of a previous facility half the size of the new one. The new facility will be an 800 megawatt (MW) coal fired power plant on land you own adjacent to the old one, to be depreciated over its 30 year life using the Straight Line Depreciation (SLD) Method, with an estimated salvage value at the end. Due to efficiencies in layout, the new facility requires the same area (600 acres) as the previous one. The facility is designed to have an 80% capacity factor each year with an efficiency of the coal fired plant of 35%. The annual operating and maintenance expenses are expected to be $0.01/kWh. The cost of coal is $3.50/million BTU's, and a carbon (CO) tax of $15 per metric ton, MT, (2205 pounds) for its useful life, is to be included. Note that coal emits 90 metric tons of CO; per billion BTU produced (1 kWh -3,413 BTU). The Company has an effective tax rate of 40% and requires an after tax MARR of 10%. To account for inflation, the operating and maintenance costs are projected to rise to S0.02/kWh and the cost of coal to rise to $4/milion BTU's starting at the EOY 15 for the balance of its useful life. Electrical Energy is projected to be sold for $0.10/kWh through EOY 14 and increased to S0.12/kWh in year 15 for the balance of its useful life. For estimating purposes, use a cost index for all (equipment and labor) costs in 1990 of 110 and the latest comparable adjusted index of 492 for all costs. In addition, the capacity (parametric) factor for all similar equipment (1.2-1.5) has been determined from experience to be 0.6. Allowance for uncertainty (Contingency) in the estimates to establish the overall budget should follow the common practice discussed in the slide presentation. In 1990, the Level 2 cost breakdown structure for equipment half (1.2-1.5) as large, unless noted (please refer to the Work Breakdown Structure, Figure 1, for all Level 3 sub-elements included) was: Site Work area unchanged (1.1) $200/acre Boiler Components (1.2) $380 million Boiler Support System Components (1.3) $130 million $25 million Coal Storage Facility Components (14) Support Facilities and Equipment (1.5) $95 million Project Integration-assume 195,000 manhours unchanged (1.9) S60/manhour Part 1 (use Solution Outline as a guide for calculations) a-Prepare a tabulation of each item in establishing your estimate and budget. Use this as the investment cost for your analysis. b-Include a tabulation of the calculation of all costs and revenue. c-Develop a Before Tax Cash Flow tabulation and Before Tax Cash Flow Diagram. d-What are the Present Worth and the Internal Rate of Return of the investment? 4 Basis of Evaluation 5 Capacity: 6 Efficiency: 7 Capacity (Onstream) Factor: 8 Initial Investment Budget: 9 Salvage Value: 10 Company Effective Tax Rate: 11 Useful Life: 12 Depreciation Method: 13 After Tax MARR: 14 Operating & Maintenance Costs First 14 years: 15 Operating & Maintenance Costs Next 16 years: 16 Cost of Coal for First 14 years: 17 Cost of Coal for Next 16 years: 18 Carbon Tax Over Useful Life: 19 Revenue for First 14 years: 20 Revenue for Next 16 years: 21 22 Revenue (show all calculations) 23 Annual Output, kW: 24 Annual Operating Hours: 25 Annual Revenue First 14 Years: 26 Annual Revenue Next 16 years: 27 28 Costs (show all calculations) 29 Annual Fuel Cost: 30 Annual O&M Costs First 14 years: 31 Annual 0&M Costs Next 16 years: 32 Annual Carbon Dioxide Emitted: 33 Annual Carbon Tax: 84 35 Investment (show all calculations) 36 List all cost estimates for Level 2 elements: 37 List Contingency to be added to Total Estimate: 38 39 Cash Flow Diagram 40 Show Before Tax MARR 41 Clearly Label all cash flows 42 43 800MW 35% 80% TBD 5% of Investment 40% 30 years SLD = TBD 10% $0.01/kWh $0.02/kWh $3.5/million BTU $4/million BTU $10/Metric Ton $0.10/kWh $0.12/kWh