The NPV is one of the most comprehensive approaches for the financial evaluation of a project. The NPV
method evaluates the future cash flows of the system in a real value basis. This is done by discounting the cash
flows at a specific interest rate. In addition, the recurrent costs of the project can be assumed to inflate or deflate
at a fixed inflation rate (Duffie & Beckman, 2006). This study assumed an interest rate of 10% in line with IEA.
The IEA argues that a lower rate would lead to significantly lower estimates for generation costs (IEA, 2010).
The inflation rate selected for the project is 2.5%. It was taken from the Peruvian Survey on Macroeconomic
Expectations of Inflation (INEI, 2012). The NPV was calculated using Equation 3.