Calculate the net present value to the society

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Reference no: EM131246272

Looking at the wind power, the initial cost of establishing a power plant is estimated to be $230,645 per megawatt with subsequent incremental costs of $39,550 (operation and maintenance). Suppose that the benefits are estimated to be at $62,700 per megawatt per year. Dr Frank estimated that the discount rate at 7.5% (The opportunity cost of money) with a current inflation rate of 2.4%.

1.- Adjust benefits and cost to 2016 real dollars (Example 2017 = time is 1 or 2016=0)

2.- Adjust for the opportunity cost of money taking into account a discount rate of 7.5% for costs and benefits

3.- Calculate the Net present value to the society

4.- Calculate the benefit to cost ratio and interpret both results Explain based on these 2 metrics if the a wind project will be feasible or not.

Reference no: EM131246272

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