Question

An​ integrated, combined cycle power plant produces 280 MW of electricity by gasifying coal. The capital investment for the plant is ​$620 ​million, spread evenly over two years. The operating life of the plant is expected to be 22 years.​ Additionally, the plant will operate at full capacity 77​% of the time​ (downtime is 23​% of any given​ year). The MARR is 10​% 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?

Answer 1