After taking the Engineering Economics course, you were invited as an expert to conduct an economic analysis for a given project. The project is related to solving the frequent electricity shutdowns in one of the major cities in Country A. Therer are three options: 1) adding more capacity, 2) purchasing power from Country B for 20-year period, and 3) Do Nothing. For the first option, there are 4 possible scenarios and only one scenario can be selected: 1) building a nuclear plant with initial cost (P) = -$50M and annual operating cost (A) = -$1.2M. Project life = 15 years. 2) building a solar power plant with P = -$32M and A = -$1.0M. Project life = 10 years. 3) buidling a hydroelectric dam with P = -$50M and A = -$1.7M. Project life = 30 years. 4) building a wind farm with P = -$28M and A = -$2.2M. Project life = 10 yeas. For the second option, Country A can sign a 20-year contract with Country B to purchase electricity. 350,000,000 kilowatt-hours is needed annually to prevent the electricity shutdowns. The price is 1.5 cents per kilowatt-hour for the first year and and then increases 6% annually for the 20-years. For the third option, Do Nothing, it is not recommended by the goverment and it should be economically justfied to be selected. By doing nothing, electricity shutdowns will continue to occur and it is anticipated that some companies will have to close down for some period of time which will result in monetary loss. These companies will then leave the city which will negatively impact the whole economy of the city. Select an appropriate planning horizon and perform an economic analysis to make recommendations regarding the best option from an economic basis. If the goverment is also concerned about environmental issues, will that change your recommendation? Use 6% interest rate for all your calculations and specify any assumtions you make. PLEASE INCLUDE YOUR CALCULATIONS/EXCEL FORMULAS AND DETAILED DESCRIPTION OF YOUR ANALYSIS IN YOUR ANSWER HERE.
After taking the Engineering Economics course, you were invited as an expert to conduct an economic analysis for a given project. The project is related to solving the frequent electricity shutdowns in one of the major cities in Country A. Therer are three options: 1) adding more capacity, 2) purchasing power from Country B for 20-year period, and 3) Do Nothing. For the first option, there are 4 possible scenarios and only one scenario can be selected: 1) building a nuclear plant with initial cost (P) = -$50M and annual operating cost (A) = -$1.2M. Project life = 15 years. 2) building a solar power plant with P = -$32M and A = -$1.0M. Project life = 10 years. 3) buidling a hydroelectric dam with P = -$50M and A = -$1.7M. Project life = 30 years. 4) building a wind farm with P = -$28M and A = -$2.2M. Project life = 10 yeas. For the second option, Country A can sign a 20-year contract with Country B to purchase electricity. 350,000,000 kilowatt-hours is needed annually to prevent the electricity shutdowns. The price is 1.5 cents per kilowatt-hour for the first year and and then increases 6% annually for the 20-years. For the third option, Do Nothing, it is not recommended by the goverment and it should be economically justfied to be selected. By doing nothing, electricity shutdowns will continue to occur and it is anticipated that some companies will have to close down for some period of time which will result in monetary loss. These companies will then leave the city which will negatively impact the whole economy of the city. Select an appropriate planning horizon and perform an economic analysis to make recommendations regarding the best option from an economic basis. If the goverment is also concerned about environmental issues, will that change your recommendation? Use 6% interest rate for all your calculations and specify any assumtions you make. PLEASE INCLUDE YOUR CALCULATIONS/EXCEL FORMULAS AND DETAILED DESCRIPTION OF YOUR ANALYSIS IN YOUR ANSWER HERE.
