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- This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
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- October 25, 2020 at 9:59 pm #593115
Hi John,
I understand we add all the costs including depreciation to work out life cycle cost.
However I came accross to this question in Kaplan exam kit where they have taken depreciation out of operating costs! Not sure where am I going wrong or may be I am not reading the question right.See below question:
A nuclear station can generate 9,000 gigawatts of elecetricity in each of its 40 years of useful life. Operating Costs are $486m per year. Operating costs include a provision for depreciation of $175m per year to recover the $7000m cost of building the power station.
Each nuclear station has an estimated decommissioning cost of $12,000m at the end of its life. The decommissioning cost relates to the cost of safety disposing of spent nuclear fuel.
Calculate:
What is the life cycle cost per gigawatt of the nuclear station (to the nearest $000) ?My answer came to $107,000 however Kaplan’s answer is $87,000.
Much appreciate your help, Thanks in advance.
JasOctober 26, 2020 at 7:09 am #593127The depreciation of $175m is spreading the initial cost of $7,000m over 40 years (7,000 / 40 = 175)
If you include the initial cost and the depreciation then you are including the $7,000 twice, which is wrong 🙂
October 26, 2020 at 10:17 pm #593205That makes sense, thanks again 🙂
October 27, 2020 at 9:03 am #593226You are welcome 🙂
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