Calculate the Internal Rate of Return (IRR) for an investment

Calculate the Internal Rate of Return (IRR) for an investment in a 400-MW power plant with an expected life of 30 years. This plant costs 1200 $/kW to build and has a heat rate of 9800 Btu/kWh. It burns a fuel that costs 1.10 $/MBtu. On average, it is expected to operate at a maximum capacity for 7446 h per year and sell its output at an average price of 31 $/MWh.

What should be the average price of electrical energy if this investment is to achieve a MARR of 13%?

Determine whether trading is centralized or decentralized in your region or country or in another area for which you have access to sufficient information. Determine also the type(s) of transmission rights that are used to hedge against the risks associated with network congestion.

Solution: