The Great Plains Authority is trying to decide between coal, fuel oil 3, low-sulphur fuel oil, and natural gas for powering their electrical generators. Fuel forecasts indicate the following needs for the upcoming year, as well as the gradient each year thereafter.

The cost of the fuel, transportation, and various pollution effects have been estimated as follows:

Cost, transportation, and storage are in the "Cost"' category, while health, crops, and uncleanliness are in the "'Disbenefits" category.

a. Calculate the annual equivalent benefits and costs of these fuels considering a life of 20 years and \(i=7\) percent.

b. Use an incremental \(B / C\) analysis to determine the best fuel to use.

c. Use a \(B-C\) analysis to determine the best fuel to use.

Transcribed Image Text:

Fuel Coal Year #1 Gradient Each Year Thereafter 770,000 tons 38,500 tons Fuel oil 3 3,005,000 barrels 150,250 barrels Low-sulphur fuel oil 2,800,000 barrels 140,000 barrels Natural gas 16,800 10 cubic feet 840 10 cubic feet