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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
An international manufacturer of prepared food items needs 50,000,000 kWh of electrical energy a year, with a maximum demand of 10,000 kW. The local utility currently charges $0.085 per kWh, a rate considered high throughout the industry. Because the firm’s power consumption is so large, its engineers are considering installing a 10,000-kW steam-turbine plant. Three types of plant have been proposed (units in thousands of dollars):
Plant APlant BPlant CAverage station heat rate   (BTU/kWh)16,50014,50013,000Total investment   (boiler/turbine/   electrical/structures)$8,530$9,498$10,546Annual operating cost:   Fuel1,128930828Labor616616616O&M150126114Supplies606060Insurance and   property taxes101214
The service life of each plant is expected to be 20 years. The plant investment will be subject to a 20-year MACRS property classification. The expected salvage value of the plant at the end of its useful life is about 10% of its original investment. The firm’s MARR is known to be 12%. The firm’s marginal income tax rate is 39%.
(a) Determine the unit power cost ($/kWh) for each plant.
(b) Which plant would provide the most economical power?
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