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Sustainable energy capital investment analysis Central Plains Power Company is considering an investment in wind farm technology to replace natural gas-generating capacity. Initial installation cost of a wind turbine is 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 hour is 1,000 kilowatts generated per hour. Annual operating information related to the wind turbine project was developed as follows: Operating cost per wind turbine megawatt hour $10 Variable operating, fuel, and maintenance costs of natural gas per megawatt hour $95 Wind turbine operating days per year 90 a. Determine the initial investment cost of the wind turbine. b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to the nearest dollar. 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). Round to the nearest dollar.

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Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 26, Problem 26.23EX
Textbook Problem

Sustainable energy capital investment analysis

Central Plains Power Company is considering an investment in wind farm technology to replace natural gas-generating capacity. Initial installation cost of a wind turbine is 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 hour is 1,000 kilowatts generated per hour.

Annual operating information related to the wind turbine project was developed as follows:

Operating cost per wind turbine megawatt hour $10
Variable operating, fuel, and maintenance costs of natural gas per megawatt hour $95
Wind turbine operating days per year 90
  1. a. Determine the initial investment cost of the wind turbine.
  2. b. Determine the annual cost savings from the wind turbine in replacing natural gas generation. Round to the nearest dollar.
  3. 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). Round to the nearest dollar.

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Chapter 26 Solutions

Accounting
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