Reference no: EM132018

Proposal A

Envisages generation of electricity from water - a hydro-electric project. The useful life of this project is estimated to be 50 years. This project will generate 20,000 million units of electricity annually. Electricity can be sold to the public at a tariff of 10 cents per unit for the first twenty years, and 7.8 cents thereafter. The annual maintenance and operation costs will be 10 percent of the capital cost for the first twenty years and 5 percent thereafter.

The economic costs and benefits for this project will be estimated from Figure 1.

Proposal B

Proposal B is a thermal project - electricity can be generated from coal. The annual maintenance and operation cost for this project will be 25 percent of its capital cost. This project will have an useful economic life of 25 years. It will generate 18,000mn units of electricity annually.

Electricity from this project will be sold at 20 cents per unit. At the end of its useful life, this project will be sold for 2 percent of its capital cost.

The economic costs and benefits for this project will be estimated from Figure 2.

Task

Your task is simply to summarize the results of your analysis.