Reference no: EM132844621

Solar Generators have the following characteristics: - A solar generator costs $12.5M to purchase and install

- The output of each solar generator depend on the weather and intensity of sunlight

- There's a 75% chance that a given year is sunnier than average, allowing each generator to yield 150,000 megawatt-hours of electricity

- There's a 25% chance that a given year is cloudier than average, restricting each generator to 50,000 megawatt-hours of electricity

- Variable cost of $0 per megawatt-hour

Ethanol Generators have the following characteristics:

- An ethanol generator costs $2.5M to purchase and install

- Each generates 100,000 megawatt-hours of electricity each yer, regardless of the weather

- Variable cost of $30 per megawatt-hour

Let's assume that you can still sell this electricity for $40/Megawatt-Hour, and you can run the test without leasing additional land or incurring additional fixed costs.

Questions:

How many years does it take the solar mini-plant to recoup its initial investment?

How many years does it take the ethanol mini-plant to recoup its initial investment?