🚀 go-pugleaf

<John@eskom.co.za> wrote in message 
news:ev2gui$3n$1@newsreader02.ops.uunet.co.za...
> Supose a complany develops a new power plant. The construction cost is 100
> million $ payable on the 1 January 2008. The current maintenance cost s 
> are
> 8 million $ per annum plus 2 million $ per 1 million units of electricity
> consumed. Assume the quantity of Electrical produced is the same as the
> quantity consumed. The consumption is 1 million units per annum beiinning 
> in
> 2008.
>
> Company X borrows the full amount for the construction cost as well as the
> the other expenses exceeding the income at a rare of intrest of 5 %per
> annum. The debt is paid with the income exceeding the expenditure. Assume
> all annual costs and income are paid at the end of the year. Ignore any
> taxes.
>
> Calculate the price per unit of Electricity to enable company X to break
> even over a term of 50 years starting on the 1 of January 2008, assuming 
> the
> power plant is worthless after 50 years.

Figures are in million $.
You need 5.48 i.e. (100 * 0.05) / (1 - 1 / (1 + 0.05)^50)
per annum for paying back 100.
Then you need 10 every year (8 + 2) for maintenance.
5.48 + 10 = 15.48 are due at the end of each year, starting
Dec. 31, 2008.
Then you must sell your 1 million units of electricity at 15.48

It is not clear to me what "Company X borrows the full
amount for the construction cost as well as the
the other expenses exceeding the income..." really means.
First income (15.48) occurs with first payments (5.48 + 8 + 2)
i.e. Dec. 31, 2008 and the two amounts are the same...

Bruno