Question

8.10 and 8.11

proposed has the following projected revenues and operating expenses in chemical plant A millions of dollars 8-10 Annual operating expenses (excluding depreciation) Year Annual revenue 7.0 10.0 15.0 20.0 22.5 24.0 25.0 4.0 5.6 6.8 7.8 8.8 9.6 10.0 4. The fixed-capital investment for the plant is $50 million with a working capital of $7.5 million. Using a MACRS depreciation schedule with a class life of 5 years, determine a. The annual cash flows b. The net present worth, using a nominal discount rate of 15 percent c. The DCFR Apower plant for generating electricity is part of a plant design proposal. Two alternative power plants with the necessary capacity have been suggested. One uses a boiler and steam turbine while the other uses a gas turbine. The following information applies to the two proposals: 8-11 Boiler and steam turbine Gas turbine Initial investment, $ Fuel costs per year, $ Maintenance and repairs per year, $ Insurance and taxes per year, $ Depreciation recovery period, yr Salvage value at end of service life, $ 600,000 160,000 12,000 18,000 20 0 400,000 230,000 15,000 12,000 10 All other costs are the same for either type of power plant. A 12 percent return is required n any investment. If one of these power plants must be accepted, which one should be recommended?

Answer 1