**Problem Overview:**An integrated, combined cycle power plant produces 280 MW of electricity by gasifying coal. The capital investment for the plant is $460 million, spread evenly over two years. The operating life of the plant is expected to be 25 years. Additionally, the plant operates at full capacity 77% of the time (downtime is 23% of any given year). The Minimum Attractive Rate of Return (MARR) is 8% per year.**Questions:**a. If the plant makes a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture?b. What is the Internal Rate of Return (IRR) for the plant? Is it profitable?**Answers:**a. The simple payback period of the plant is ___ years. (Round up to one decimal place.)- It's a [dropdown option] venture.b. The IRR for the plant is ___%. (Round to one decimal place.)- The plant is [dropdown option].

Simple payback period refers to the amount of time it takes to recover the cost of an investment. In…

An integrated, combined cycle power plant produces 280 MW of electricity by gasifying coal. The capital investment for the plant is $460 million, spread evenly over two years. The operating life of the plant is expected to be 25 years. Additionally, the plant will operate at full capacity 77% of the time (downtime is 23% of any given year). The MARR is 8% per year. a. If this plant will make a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable?

An integrated, combined cycle power plant produces 280 MW of electricity by gasifying coal. The capital investment for the plant is $460 million, spread evenly over two years. The operating life of the plant is expected to be 25 years. Additionally, the plant will operate at full capacity 77% of the time (downtime is 23% of any given year). The MARR is 8% per year. a. If this plant will make a profit of two cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture? b. What is the IRR for the plant? Is it profitable?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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