Spring 2016 – EBF 304WMemorandum 1Due: 5:00pm on Friday, 29 January 2016 (via ANGEL)50 pointsInstruc

Spring 2016 – EBF 304WMemorandum 1Due: 5:00pm on Friday, 29 January 2016 (via ANGEL)50 pointsInstruc

Spring 2016 – EBF 304WMemorandum 1Due: 5:00pm on Friday, 29 January 2016 (via ANGEL)50 pointsInstructions: Utilize the provided template for formatting your memo; do not change any of themargins, line spacing, or fonts. Completely answer the following question(s) in no more than 2pages. You may utilize figures or tables if they aid in comprehension of your response. If you usegraphs or tables in your answers, they must be appropriately captioned and clear enough that Ican understand them (this means labeling axes, variables, and so forth). Your memo must besubmitted in a single electronic file in pdf file format. Late assignments will lose 10% per lateday (e.g., late day 1 begins at 5:01pm on the due date and ends at 5:00pm on the following day).Question 1 (50 points):Your company is planning to construct a gas fired power plant in the Philadelphiaarea. They are considering one of the two following options, a Rolls Royce simplecycle gas turbine generator and a General Electric combined cycle gas turbine /steam turbine generator. Each power plant will produce power after constructionfor a 20-year period. Details on the power plant costs, capabilities, andefficiencies is included in the table below. The price of natural gas in the future isuncertain.Compare these options in terms of NPV and IRR over the range ofpossible gas prices. Do not consider taxes or depreciation. Assume adiscount rate for your company of 10%. Explain the results of youranalysis in a memo, and make a recommendation. Should your companypursue a particular option, the alternative, or neither? Describe what kindsof changes to the provided assumptions would change yourrecommendation.Page 1 of 2Table of Power Plant Financial and Operating ExpensesParameterRolls Royce SimpleCycle GeneratorInitial Capital$486,000,000Expenditure [$]Annual Maintenance$8,750,000(Fixed) [$/yr]Annual Maintenance$3.80(Variable) [$/MWh]Fuel Cost$2.20 – $8.40[$/MMBtu*]Fuel Efficiency9.3 million[Btu/MWh]Emissions Permits0.28[$/MWh]Power Generated Per2,360,000Year [MWh/yr]Revenue Per Unit of$126.00Electricity ($/MWh)*MMBtu is millions of Btu’sGeneral ElectricCombined CycleGenerator$475,000,000$10,750,000$3.15$2.20 – $8.407.1 million0.212,650,000$126.00Page 2 of 2

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