A municipality must build a new electric generating plant and can choose between

Question

A municipality must build a new electric generating plant and can choose between a steam and a hydro facility. The anticipated cost of the steam plant is $10 million. Comparative data for the two plants are:

 Plant

   Generating Cost,    including maintenance,     per k Wh

   Equipment life,years

 Salvage Value, percentage of first cost

 Steam

 $0.004

                20

              10

 Hydro

 $0.002

                30

              10

The expected annual consumption of power is 300,000 MWh. If money is borrowed at 5 percent interest compounded annually, what first cost of the hydro plant would make the two aternatives equally attractive?

 Plant

   Generating Cost,    including maintenance,     per k Wh

   Equipment life,years

 Salvage Value, percentage of first cost

 Steam

 $0.004

                20

              10

 Hydro

 $0.002

                30

              10

Explanation / Answer

$21593000

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