An integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment

Question:

An integrated, combined cycle power plant produces 285 MW of electricity by gasifying coal. The capital investment for the plant is $570 million, spread evenly over two years. The operating life of the plant is expected to be 20 years. Additionally, the plant will operate at full capacity 75% of the time (downtime is 25% of any given year).
a. If this plant will make a profit of three cents per kilowatt-hour of electricity sold to the power grid, what is the simple payback period of the plant? Is it a low-risk venture?
b. What is the IRR for the plant? Is it profitable?

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...

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