Question

In: Finance

The initial investment for a geothermal power plant is $60,000,000 and is to be paid in...

  1. The initial investment for a geothermal power plant is $60,000,000 and is to be paid in two years (year 0 and year 1) equally. The electricity generated by the plant is expected to bring revenue of 10,000,000 per year increasing at a rate of 3% annually. The total annual expenses of the plant will be 1,500,000 increasing at a rate 4% annually. The company that owns the plant plans to borrow 50% of the capital expenditure at a rate 6%. The discount rate for this company is 12% and its taxation rate is 35%. A 10-year depreciation period is allowed for this power plant. The plant is expected to generate electricity for 30 years after which it will have zero value. What is the present value of this investment? Should the company undertake the investment?
  2. What would be the answer to the plant of problem (a)  if the company were allowed to borrow 80% of the cost of the geothermal power plant at an annual rate of 5%.
  3. In order to promote the development of alternative energy sources the government allows 5-year depreciation for the project of problem 12. What is the net present value of the investment?
  4. In order to accelerate the use of geothermal power, the government allows a 20% tax credit for investment in geothermal energy (in the years the investment is made) as well as 5-year depreciation for the project of problem 12. What is the net present value of the investment now?
  5. “The government does not need to subsidize energy projects. In a free market economy, we should allow the market forces to determine if a project is going to succeed or fail.” Comment.

Solutions

Expert Solution


Related Solutions

Design a geothermal source power generation system; a) Describe the type of geothermal power plant (Total...
Design a geothermal source power generation system; a) Describe the type of geothermal power plant (Total Flow / Flash / Binary) b) Describe the turbine isentropic efficiency c) Show the entire cycle in the T-s diagram. d) Calculate the power produced. answer for expert: Not all , just one of theese three ( Total flow / flash or binary)
A binary geothermal power plant uses geothermal water at 160°C as the heat source. The plant...
A binary geothermal power plant uses geothermal water at 160°C as the heat source. The plant operates on the simple Rankine cycle with isobutane as the working fluid. Heat is transferred to the cycle by a heat exchanger in which geothermal liquid water enters at 160°C at a rate of 555.9 kg/s and leaves at 90°C. Isobutane enters the turbine at 3.25 MPa and 147°C and leaves at 79.5°C and 410 kPa. Isobutane is condensed in an air-cooled condenser and...
Explain the biggest challenge in maintaining a geothermal power plant.
Explain the biggest challenge in maintaining a geothermal power plant.
fill blanks: D) a geothermal power plant running on a binary power cycle uses ........... as...
fill blanks: D) a geothermal power plant running on a binary power cycle uses ........... as the working fluid. e) using biomass as a fossil fuel does nto contribute to global climate change because ................................. F) the three renewable froms of energy that each provide about 6% of the total energy consumed in the USA are ............... , .................. , and .............. G) when the atmospheric increases with altitude is called an .................
In a double flash geothermal power plant, the high-pressure separator is operating at 1 MPa and...
In a double flash geothermal power plant, the high-pressure separator is operating at 1 MPa and the adiabatic low-pressure separator is operating at 300 kPa. The steam quality entering the adiabatic high-pressure separator is 0.3. The mass flow of saturated liquid leaving the low-pressure separator is 15 kgs. The exit pressure of the steam turbine is 15 kPa and the turbine isentropic efficiency is 0.8. Calculate a. The mass flow at the turbine exit b. The mass flow rate entering...
Why the wave power, tidal power and geothermal power is not able to use in some...
Why the wave power, tidal power and geothermal power is not able to use in some country . Explain in detail.
Several geothermal power plants are in operation in the united states and more are being built...
Several geothermal power plants are in operation in the united states and more are being built since the heat source of a geothermal plant is hot geothermal water which is “free energy.” An 8-MW geothermal power plant is being considered at a location where geothermal water 160 degrees C is available. Geothermal water is to serve as the heat source for a closed Rankine power cycle with refringent 134a as the working fluid. Specify suitable temperature and pressures for the...
A coal-fired power plant produces power  with costs . Each unit of power earns the plant ....
A coal-fired power plant produces power  with costs . Each unit of power earns the plant . Burning coal releases particulate matter (PM2.5), a pollutant that is known to cause heart disease, lung disease, and birth defects. The coal plant borders a wildlife sanctuary which sells tourism visits  for a price $30. However, the sanctuary's animals are getting sick due to the negative externality of PM2.5, such that the costs to the sanctuary are . The local government decides to tax the...
CSC is evaluating a new project to produce encapsulators. The initial investment in plant and equipment...
CSC is evaluating a new project to produce encapsulators. The initial investment in plant and equipment is $500,000. Sales of encapsulators in year 1 are forecasted at $200,000 and costs at $100,000. Both are expected to increase by 10% a year in line with inflation. Profits are taxed at 35%. Working capital in each year consists of inventories of raw materials and is forecasted at 20% of sales in the following year. The project will last five years and the...
Americo Corp is considering construction of a manufacturing plant in Brazil. The initial investment will cost...
Americo Corp is considering construction of a manufacturing plant in Brazil. The initial investment will cost 14 million Brazilian reals (R). The company plans to keep the plant open for 3 years during which cash flows from operations will be 5million, 5million and 4 million reals respectively at end each of the three years. At end of the third year Americo plans to sell the plant for 10 million reals. Americo’s required rate of return is 15% and the current...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT