Refer to the chapter opener and Example 7-14. As an alternative to the coal-fired plant, PennCo could construct an 800 MW natural gas–fired plant. This plant would require the same initial investment of $1.12 billion dollars to be depreciated over its 30-year life using the SL method with SV30=0SV30=0. The capacity factor estimate of the plant would still be 80%, but the efficiency of the natural gas–fired plant would be 40%. The annual operating and maintenance expense is expected to be $0.01 per kWh. The cost of natural gas is $8.00 per million Btu and the carbon dioxide tax is $15 per metric ton. Natural gas emits 55 metric tons of carbon dioxide per billion Btu produced. The effective income tax rate is 25%, and the after-tax MARR is 10% per year. Based on the after-tax cost of electricity, create a spreadsheet to determine whether PennCo should construct a natural gas–fired or coal-fired plant. Note: 1kWh=3,413 Btu.Chapter Opener - (1st image), Example - (2nd image) For the question above I got the answer that from this website, but I don't know how did they got the numbers of the following: Annual output, Annual O & M, Annual cost of gas, Annual CO2 gas, Annual CO2 emmited, CR, BTCF, D, TI, TP, ATCF..... (you can look for the answer here - https://www.bartleby.com/solution-answer/chapter-7-problem-60se-engineering-economy-17th-edition-17th-edition/9780134870069/9542d37f-5c4c-48a6-a58b-afd6dbb7bab6)So, could you please solve this question in a spreadsheet, explaining how did you get the numbers by showing formulas and cell references. Thanks. EXAMPLE 7-14PennCo Electric Utility CompanyHere we refer back to the chapter opener where the question of the after-taxcost of electricity production was raised. For the PennCo plant, the annualfuel expense will be $191,346,432 per year. The operating and maintenanceexpense will be $112,128,000 per year, and the carbon tax will be $73,805,052per year. The total annual expense of operating the plant will therefore be$377,279,484. Armed with these cost estimates, we can calculate the after-taxcost of the plant by using the template of Figure 7-5 (all numbers are millions ofdollars).ΕΟΥ01 - 30*dk =BTCF-$1,120.000-377.279TaxableDepreciation Income= $1,120/30 = $37.33337.333*-414.613Cash Flow forIncome Taxes165.845ATCF-$1,120.000-211.434The annual worth of the PennCo plant, assuming inflation is negligible, is −$1,120(A/P, 10%, 30) – $211.434, which equals -$330.266 million. We can calculate theafter-tax cost of a kilowatt-hour by dividing this number ($330,266,000) by theelectrical output of 5,606,400,000 kWh. It is close to $0.06 per kWh. The PennCo Electric Utility Company is going to construct an 800megawatt (MW) coal-fired plant that will have a 30-year operatinglife. The $1.12-billion construction cost will be depreciated withthe straight-line method over 30 years to a terminal book value of zero. Its marketvalue will also be negligible after 30 years. This plant's efficiency will be 35%, itscapacity factor is estimated to be 80%, and annual operating and maintenanceexpenses are expected to be $0.02 per kilowatt hour (kWh). In addition, the costof coal is estimated to average $3.50 per million Btu, and the tax on carbon dioxideemissions will be $15 per metric ton. Burning coal emits 90 metric tons of CO2 perbillion Btu produced. If the effective income tax rate for PennCo is 40%, what isthe after-tax cost of electricity per year for this plant? The firm's after-tax minimumattractive rate of return (MARR) is 10% per year. After studying this chapter, youwill be able to include the impact of income taxes on engineering projects and answerthis question (see Example 7-14).

The after-tax cost of electricity refers to the total cost of electricity after taking into account…

Answered: Refer to the chapter opener and Example…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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Refer to the chapter opener and Example 7-14. As an alternative to the coal-fired plant, PennCo could construct an 800 MW natural gas–fired plant. This plant would require the same initial investment of $1.12 billion dollars to be depreciated over its 30-year life using the SL method with SV30=0SV30=0. The capacity factor estimate of the plant would still be 80%, but the efficiency of the natural gas–fired plant would be 40%. The annual operating and maintenance expense is expected to be $0.01 per kWh. The cost of natural gas is $8.00 per million Btu and the carbon dioxide tax is $15 per metric ton. Natural gas emits 55 metric tons of carbon dioxide per billion Btu produced. The effective income tax rate is 25%, and the after-tax MARR is 10% per year. Based on the after-tax cost of electricity, create a spreadsheet to determine whether PennCo should construct a natural gas–fired or coal-fired plant. Note: 1kWh=3,413 Btu.

Chapter Opener - (1st image), Example - (2nd image)

For the question above I got the answer that from this website, but I don't know how did they got the numbers of the following: Annual output, Annual O & M, Annual cost of gas, Annual CO2 gas, Annual CO2 emmited, CR, BTCF, D, TI, TP, ATCF..... (you can look for the answer here - https://www.bartleby.com/solution-answer/chapter-7-problem-60se-engineering-economy-17th-edition-17th-edition/9780134870069/9542d37f-5c4c-48a6-a58b-afd6dbb7bab6)

So, could you please solve this question in a spreadsheet, explaining how did you get the numbers by showing formulas and cell references. Thanks.

EXAMPLE 7-14
PennCo Electric Utility Company
Here we refer back to the chapter opener where the question of the after-tax
cost of electricity production was raised. For the PennCo plant, the annual
fuel expense will be $191,346,432 per year. The operating and maintenance
expense will be $112,128,000 per year, and the carbon tax will be $73,805,052
per year. The total annual expense of operating the plant will therefore be
$377,279,484. Armed with these cost estimates, we can calculate the after-tax
cost of the plant by using the template of Figure 7-5 (all numbers are millions of
dollars).
ΕΟΥ
0
1 - 30
*dk =
BTCF
-$1,120.000
-377.279
Taxable
Depreciation Income
= $1,120/30 = $37.333
37.333*
-414.613
Cash Flow for
Income Taxes
165.845
ATCF
-$1,120.000
-211.434
The annual worth of the PennCo plant, assuming inflation is negligible, is −$1,120
(A/P, 10%, 30) – $211.434, which equals -$330.266 million. We can calculate the
after-tax cost of a kilowatt-hour by dividing this number ($330,266,000) by the
electrical output of 5,606,400,000 kWh. It is close to $0.06 per kWh.

T
he PennCo Electric Utility Company is going to construct an 800
megawatt (MW) coal-fired plant that will have a 30-year operating
life. The $1.12-billion construction cost will be depreciated with
the straight-line method over 30 years to a terminal book value of zero. Its market
value will also be negligible after 30 years. This plant's efficiency will be 35%, its
capacity factor is estimated to be 80%, and annual operating and maintenance
expenses are expected to be $0.02 per kilowatt hour (kWh). In addition, the cost
of coal is estimated to average $3.50 per million Btu, and the tax on carbon dioxide
emissions will be $15 per metric ton. Burning coal emits 90 metric tons of CO2 per
billion Btu produced. If the effective income tax rate for PennCo is 40%, what is
the after-tax cost of electricity per year for this plant? The firm's after-tax minimum
attractive rate of return (MARR) is 10% per year. After studying this chapter, you
will be able to include the impact of income taxes on engineering projects and answer
this question (see Example 7-14).

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