Toronto Hydro has two options for upgrading a natural gas power station to meet new government standards. Option 1: Toronto Hydro will make the upgrades themselves. This is expected to cost $13,100 at the end of every three months for 15 years. At the end of the operation (in 15 years) Toronto Hydro expects to sell all equipment needed for the upgrade for $110,000. Option 2: Pay experienced contractors. This will cost $31,000 up front and $12,500 quarterly (at the end of every three months) for 10 years. Assume all interest is 2.24% compounded quarterly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1: P/Y = C/Y = N = I/Y = PV = PMT= FV = NPV (Option 1) = $ P/Y C/Y N I/Y PV Payments (Cost) 2) Find the net present value of option 2: Payments (Cost) PMT $ FV $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) $ $ % $ $ Sale of equipment (Residual) $ % $ $ % (rounded to the nearest whole number)
Toronto Hydro has two options for upgrading a natural gas power station to meet new government standards. Option 1: Toronto Hydro will make the upgrades themselves. This is expected to cost $13,100 at the end of every three months for 15 years. At the end of the operation (in 15 years) Toronto Hydro expects to sell all equipment needed for the upgrade for $110,000. Option 2: Pay experienced contractors. This will cost $31,000 up front and $12,500 quarterly (at the end of every three months) for 10 years. Assume all interest is 2.24% compounded quarterly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1: P/Y = C/Y = N = I/Y = PV = PMT= FV = NPV (Option 1) = $ P/Y C/Y N I/Y PV Payments (Cost) 2) Find the net present value of option 2: Payments (Cost) PMT $ FV $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) $ $ % $ $ Sale of equipment (Residual) $ % $ $ % (rounded to the nearest whole number)
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Transcribed Image Text:Toronto Hydro has two options for upgrading a natural gas power station to
meet new government standards.
Option 1: Toronto Hydro will make the upgrades themselves. This is expected
to cost $13,100 at the end of every three months for 15 years. At the end of the
operation (in 15 years) Toronto Hydro expects to sell all equipment needed for
the upgrade for $110,000.
Option 2: Pay experienced contractors. This will cost $31,000 up front and
$12,500 quarterly (at the end of every three months) for 10 years.
Assume all interest is 2.24% compounded quarterly.
Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest
dollar. Round all other answers to two decimal places where applicable.
1) Find the net present value of option 1:
P/Y =
C/Y =
N =
I/Y =
PV =
PMT=
FV =
NPV (Option 1) = $
P/Y
C/Y
2) Find the net present value of option 2:
Payments (Cost)
N
I/Y
(If the NPV is negative, enter it as a negative number. If the NPV is zero,
enter 0.)
PV
Payments (Cost)
PMT
FV
%
$
$
Sale of equipment
(Residual)
$
%
$
$
%
(rounded to the nearest whole number)
Transcribed Image Text:(If the NPV is negative, enter it as a negative number. If the NPV is zero,
enter 0.)
NPV (Option 2) = $
(round to the nearest whole number)
3) Which option should Toronto Hydro choose?
Option 1
Option 2
Either option could be chosen
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