Power Plant Options (g07)

results.md

# Power Plant Analysis

## Question 1: no carbon tax

If it were certain there would **not** be a carbon tax, which plant would be better: the standard version or the CCS plant?

The standard version is better. 

Explanation (not required): It has an NPV of $1015.5M and an IRR of 17.9%. The CCS plant is lower on both measures: it has an NPV of $536.5M and an IRR of 11.6%.

## Question 2: certain carbon tax

If it were certain there **would** be a carbon tax, which plant would be better: the standard version or the CCS plant?

The CCS plant is better.

Explanation (not required): Its NPV of $536.5M and IRR of 11.6% are both better than the standard plant under a certain carbon tax: $175.5M and 9.1%.

## Question 3: 50% chance of a carbon tax

If there is a 50% chance of a carbon tax, which plant would be better: the standard plant or the CCS version?

The standard plant.

Explanation (not required): The expected NPV of the standard plant is $595.6M and its IRR is 14.5%. Both are better than the CCS plant.

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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 02/13/2022