A large manufacturing company in Jubail is consideringan electric power plant project in order to save on their electricpower consumption by generating its own power supply. The companycurrently uses 552,000 kW of electric energy a year and pays anaverage of $3.05 per kwh. The construction of the power plant wouldrequire an initial cost of $1,600,000 now plus an additional$950,000 investment at the end of the first year. It is expected tobe operational for 10 years with an estimated residual value of$160,000 at the end of the 11th year. Since the installation of theproject would take about one year, the annual benefit (in terms ofsavings) as well as the annual costs would occur only starting atthe end of the second year. At that time, the annual operation andmaintenance cost is estimated at $750,000 and expected to increaseby 5% annually until the end of its useful life. As the capacity ofthe power plant would be more than adequate what the companyneeded, the excess energy could be supplied to the neighboringestablishments from the fifth year up to the end of the productivelife of the project, thereby creating an additional income of$105,000 per year.
Suppose MARR=15%, evaluate this project proposal using all relevantand applicable project assessment tools and techniques. Based onthe analysis results, write a detailed recommendation reportexplaining and justifying your decision whether the projectproposal should be accepted or rejected.