PLANT ECONOMIC ANALYSIS

Assumptions:
1. Method used is Straight Line Method.

2. Power plant operates 365 days per year.

3. Useful life of plant is 25 years.

4. One (1) US dollar is assumed to be equivalent to 52.00 Pesos.

5. Labor cost is 60% of capital cost.

To compute for the Payback Period:

From the book Engineering Economy by Sullivan et al. (2013),

𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 =
𝐴𝑛𝑛𝑢𝑎𝑙 𝐼𝑛𝑐𝑜𝑚𝑒

Wherein:

 Total investment = total expenses to build the plant

Total investment = capital cost + cost of cooling towers + cost of jacket water pump + cost of main

storage fuel tanks + cost of day tanks + cost of crane + labor cost

= 𝑃 769, 601.40 + 𝑃 1, 560, 000.00 + 𝑃 94, 600, 000.00 +

𝑃 1, 300, 000.00 (5 𝑐𝑜𝑜𝑙𝑖𝑛𝑔 𝑡𝑜𝑤𝑒𝑟𝑠) + 𝑃 52, 000.00 (10 𝑗𝑎𝑐𝑘𝑒𝑡 𝑤𝑎𝑡𝑒𝑟 𝑝𝑢𝑚𝑝𝑠) +

𝑃 1, 040, 000.00 (3 𝐹𝑢𝑒𝑙 𝑇𝑎𝑛𝑘𝑠) + 𝑃 403, 406.89 (7 𝐷𝑎𝑦 𝑇𝑎𝑛𝑘𝑠) +

𝑃 202, 800.00 (1 𝑡𝑟𝑎𝑣𝑒𝑙 𝑐𝑟𝑎𝑛𝑒) + P 58, 157, 762.64

Thus,

Total investment = P 168, 254, 015.30

  Annual income = (cost of 1 kwh)(energy generated)(365 days per year)

𝑃 6.00 𝑘𝑤 − ℎ𝑟 365 𝑑𝑎𝑦𝑠

= 𝑥 136, 750 𝑥
𝑘𝑤 − ℎ𝑟 𝑑𝑎𝑦 1 𝑦𝑒𝑎𝑟

Thus,

Annual income = P 299, 482, 500.00 /year

Now solving for the payback period:

𝑃 168, 254, 015. 30

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 =
𝑃 299, 482, 500.00 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟

∴ 𝑷𝒂𝒚𝒃𝒂𝒄𝒌 𝑷𝒆𝒓𝒊𝒐𝒅 = 𝟎. 𝟓𝟔 𝒚𝒆𝒂𝒓𝒔 𝒐𝒓 𝟔 𝒎𝒐𝒏𝒕𝒉𝒔 𝒂𝒏𝒅 𝟐𝟐 𝒅𝒂𝒚𝒔

To compute for the Return of Investment:

From the book Engineering Economy by Sullivan et al. (2013),

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 = 𝑥100%
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

(𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒 − 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 − 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝐶𝑜𝑠𝑡)

= 𝑥100%
𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

Wherein:

Gross Income = Annual Income = P 299, 482, 500.00

Expenses:

Maintenance cost = P 10, 656, 000.00

Labor cost = P 21, 312, 000.00

Interest, taxes and insurances = P 11, 146, 904.16

Total = P 43, 114, 904.16 per year

Depreciation cost = ADR = P 3, 772, 739.36 per year

Now solving for the Return of Investment:

P 299, 482, 500.00 per year + P 43, 114, 904.16 per year + P 3, 772, 739.36 per year
𝑅𝑂𝐼 = 𝑥100%
P 168, 254, 015.30

∴ 𝑹𝑶𝑰 = 𝟐𝟎𝟓. 𝟖𝟔 %