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What is the minimum amount of electricity

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You sell energy in units of power-over-time. In this case the unit we will use is "Megawatt-Hours." Your current plant runs entirely on natural gas and is capable of generating 1000 Megawatts of electricity, which translates to 8.8M Megawatt-Hours per year if it runs 24/7/365. However, it does not generally run around the clock.

You know the following things about your business:

  1. You lease the land on which your power plant operates from the state for $5M/month
  2. You have fixed costs of $25M/year, which covers general plant upkeep, salaried workers, etc.
  3. You have variable costs equal to $20 per megawatt-hour
  4. You are able to sell electricity for $40 per megawatt-hour
  5. Your investors have contributed $400M to EnergyOne and expect to make back 10% of that in profit each year

Problem 1: What is the minimum amount of electricity you need to generate and sell to hit the required profit?

Reference no: EM132701504

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