Sohar Refinery is replacing its current steam plant with a six-megawatt cogeneration plant that will produce both steam and electric power for operations. The new plant will

Sohar Refinery is replacing its current steam plant with a six-megawatt cogeneration plant that will produce both steam and electric power for operations. The new plant will use biogas as a source of fuel, which will eliminate the need for Sohar Refinery to purchase a large amount of electric power from a public utility. To move to the new system, Sohar Refinery will have to integrate a new turbo-generator and cooling tower with its current system. The estimated first cost of the equipment and installation is $3,000,000, though there is some uncertainty surrounding this estimate. The plant is expected to have a 20-year life and no scrap value at the end of this life. In addition to the first cost, the turbo-generator will require an overhaul (repair/maintenance/renovation) with an estimated cost of $35,000 at the end of years 4, 8, 12, and 16. The cooling tower will need an overhaul at the end of 10 years. This is expected to cost $17,000.
The cogeneration system is expected to have higher annual operating and maintenance costs than the current system and will require the use of chemicals to treat the water used in the new plant. These incremental costs are estimated to be $65,000 per year. The incremental annual costs of biogas fuel are estimated to be $375,000. The cogeneration plant will save Sohar Refinery from having to purchase 40,000,000 kilowatt-hours of electricity per year at $0.025 per kilowatt-hour, an annual savings of $1,000,000. Sohar Refinery uses a MARR of 12%. Make an informed judgment for Sohar Refinery whether it is feasible to invest in this cogeneration plant or not. What will be the impact of ±5% to ±10% in each of the parameters of the project?
Having completed the sensitivity analysis (with an impact of ±5% to ±10% in each of the parameters of the project), the company wants to explore further the impact of changes in the parameters on the viability of the project. You are to carry out a break-even analysis for each of these parameters to find out what range of values results in a viable project and to determine the “break-even” parameter values that make the equivalent worth of the project zero. You are also to construct a graph to illustrate the equivalent worth of the project as a function of each parameter. Based on your methodology and all analysis, prepare a detailed report and PowerPoint presentation (size widescreen 16:9) with a similarity index of less than 15%.