Problem

An electric utility plans to build a nuclear power plant. It estimates comstruction costs...

An electric utility plans to build a nuclear power plant. It estimates comstruction costs will be 1, 2, 3, and 1 billion dollars in Years 1-5, respectively, Operating costs will be $0.5 billion in Year 6, thereafter growing arithmetically at a rate of $0.5 billion per year out to Year 50. Benefits to the utility in electricity sales are estimated to be $1.0 billion in year 6, then growing at a rate of 2% out to year 50. In years 51-53, decommissioning costs of $3.2, and 1 billion are incurred, respectively. Draw the cash flow digram from the utility’s viewpoint.

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