NRG Energy plans to construct a giant solar plant in Santa Teresa, New Mexico, t
ID: 1098867 • Letter: N
Question
NRG Energy plans to construct a giant solar plant in Santa Teresa, New Mexico, to supply electricity to 30,000 southern NM and western TX homes. The plant will have 390,000 heliostats to concentrate sunlight onto 32 water towers to generate steam. NRG will spend $560 million in constructing the plant and $430,000 per year in operating it. If a salvage value of 20% of the initial cost is assumed, how much will the company have to make each year for 15 years in order to recover its investment at a MARR of 18% per year?
Explanation / Answer
Intial investment = $560,000,000
Annual Operating COst = $430,000
Salvage Value = Initial Investment*20%=$112,000,000
Let annual earning be x
Net cash flow each year will be (x-430,000)
Present worth of Salvage Value=112,000,000/(1+18%)^15=9,353,796.41
Net initial investment,NI=Intial investment -Present worth of Salvage Value=$550,646,203.59
For MARR=18% and to recover intial investment,
Net annual cash flow = NI*MARR*(1+MARR)^n/{(1+MARR)^n-1)=108,148,446.57
(x-430,000)=108,148,446.57
x=$108,578,446.57
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