The University of California at San Diego is considering a plan to build a 8- megawatt cogeneration plant to provide for part of its power needs. The cost of the plant is expected to be $41 million. The university consumes 55,000 megawatt-hours per year at a cost of $120 per megawatt-hour.

(a) If the university will be able to produce power at half the cost that it now pays, what rate of return will it make on its investment for an expected power plant life of 30 years?

(b) If, in addition, the university can sell an average of 12,000 megawatthours per year back to the utility at S90 per megawatt-hour, what rate of return will it make?

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The initial cost of the plant is 41 million The university consumes 55000 megawatts per hour at the cost of 120 per megawatthour a It is given that th... View the full answer