Essay Title: 

economics

April 1, 2016 | Author: | Posted in investment, mathematics and economics

ECONOMICS ANALYSIS OF BUILDING POWER PLANT

The goal of the project

Goal is to construct and operate independent power plants (IPPs ) for the generation , The goals of power privately owned power plant is to minimize cost in its operation . To be assured of uninterruptible power supply . To isolate the company from the problems such as sudden price changes , inadequate power supply and government legislation concerning the power industry . Also , the purpose of this project is to serve in the transmission and distribution of power to its own industrial own power needs [banner_entry_middle]

. And to complement the Government ‘s efforts to improve the power sector by helping to bridge the huge energy gap in a timely manner , and to alleviate the pains of several industrialists in the country . The goal of Independent Power Plant is to initiate the emergence of high reliability in power supply , especially for the industrial sector . Some of the goals is attributed to its operations . The company can control the level of generation , the cost of producing the electricity , Also to help the government in the electricity shortage . The result of the project is there will be available power supply for other new company The company can maximize production thus giving more job opportunities the government can earn more taxes . And these will be use for more infrastructure project for the macroeconomics of the country

The Opportunity Cost of the Project

The opportunity cost of the project is the cost of investing the money to a more profitable endeavor instead of the project . The cost of saving the 500 ,000 .00 in a bank it will earn interest with the prevailing interest of 16 percent per year . This money can use as added capital for the company it will be converted into finished product and will earn mark up with a conservative estimate of fifty percent per unit . The money can be invested in money market which yield an interest of doubling its amount for a certain period . This project entails of acquiring an increase in fixed assets which makes the company highly leverage . These fixed assets incur more cost in operation , operating supplies , taxes , and maintenance , now this cost can be considered as opportunity lost such that this money could be could use for a profitable investment . This amount can be estimated to doubling the capitalization . Several industries are poised to expand production capacity , and those which have shutdown because of power supply problems are expected to come back on stream after the completion of this power plant . Because there will be available power that can use for the other companies . The generation of electrical power is a growth industry . The opportunity cost could be that this will be invested in a more profitable project which yield higher profit as compared to this power plants . The privately owned plants are being constructed to profit from the emerging energy market resulting from deregulation . These power operations are gearing up perhaps to sell energy in other companies Further more… [banner_entry_footer]

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