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Question 5 Evaluate a combined cycle power plant on the basis of the Present Worth Method (PW) when MARR is 12% per year Pertinent cost data are as follows: (Power Plant (thousands of S) Investment Cost: $12,297 Useful life: 15 ears Market Value (EQY 15) $3,000 Annual Operating expenses: $1,000 Overhaul cost-end of 5th year $1,933 Overhaul cost-end of 10th year $1,219 -> Moving to the next question prevents changes to this answer

Answer 1

The present worth of the given cash flow can be written as

PW = -12,297–1,000(P/A, 12%, 15)-1,933(P/F,12%, 5)- 1, 219(P/F, 12%, 10) + 3,000(P/F, 12%, 15)

= 1- 1.12-15 PW = -12, 297–1,000x = 0.12 1,933 1.125 1,219 1.1210 T 3,000 1.1215

PW = -12, 297 – 1,000 x 6.8108 - 1933 x 0.5674 – 1,219 x 0.3219+ 3.000 x 0.1826

=> PW = -12,297-6.810.86-1. 096.84-392.49+548.09

> PW = _$ 20,049.10

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