An international manufacturer of prepared food items needs 50,000,000 kWh of electrical energy a year, with a maximum demand of 10,000 kW. The local utility currently charges $0.085 per kWh, a rate considered high throughout the industry. Because the firm’s power consumption is so large, its engineers are considering installing a 10,000-kW steam-turbine plant. Three types of plant have been proposed (units in thousands of dollars):
Plant A Plant B Plant C
16,500 14,500 13,000 AVERAGE STATION HEAT RATE
8,530 9,498 10,546 TOTAL INVESTMENT
1,128 930 828 ANNUAL FUEL COST
616 616 616 ANNUAL OPERATING LABOR COST
150 126 114 ANNUAL MAINTENANCE COST
60 60 60 SUPPLIES
10 12 14 INSURANCE AND PROPERTY TAXES
The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm’s MARR is known to be 12%. The firm’s marginal income tax rate is 39%.
(a) Determine the unit power cost ($/kWh) for each plant.
(b) Which plant would provide the most economical power?
WHAT IS PLANT C'S annual equivalent of the depreciation tax shield?
WHAT IS PLANT C'S what is the annual equivalent of the annual equivalent cost?
WHAT IS PLANT C's what is the unit cost?