Question

T m Now 186 « Cengage The ghi nhd: Acco... Q eBook Calculator Print Item Wind turbine capital investment analysis Central Plains Power Company is considering an investment in wind farm technology to reduce its use of natural gas. Initial Installation costs are expected to be $1,200 per kilowatt-hour of capacity. The wind turbine has a capacity of generating 2 megawatts per hour. A kilowatt-hour is 1,000 watts generated per hour and a megawatt hours 1,000 kilowatts generated per hour. Annual operating information related to the wind turbine project was developed as follows: Wind capacity factor 25% Operating cost per wind turbine megawatt hour $10 Variable operating, fuel, and maintenance costs per natural gas megawatt hour $95 Days per year 365 *A factor that measures the reduction from full capacity due to the variability of wind a. Determine the initial investment cost of the wind turbine. $2,400,000 b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to nearest whole dollar. $ 240,900 x c. Determine the net present value of the project assuming a 15-year life and 12% minimum rate of return. (Use the present value tables in Appendix A) $-759,262 x Check My Work Partially correct

Answer 1

b.

с B Details А Particular 2 Variable operating cost per mwh natural gas 3 Operating cost per mwh:wind turbine 4 Megawatt hour cost saving using wind turbine Wind turbine mwh generated per year(4,320mwh 5 WN) 6 Annual cost savings Amount $95 (S101 $85 $367,200

Wind turbine mwh generated per year = 2*90*24 = 4,320 mwh

c.

B А Particular 2 Annual net cash flow savings from wind turbines 3 Present value of a $1 annuity at 12% for 15 periods 4 Present value of annual savings (rounded) 5 Amount to be invested 6 Net present value Amount (S) 367,200 6.81086 2,500.948 2.400.000 100,948