1. You are the operator of a gas plant and would like to improve the throughput. Currently the production forecast generates a constant net cash flow of $ 250,000 year. You develop two different options for management and partner approval. Option #1: You optimize the gathering system and increase capacity of the inlet separators. The capital investment is estimated at 1,400,000$. Option #2: You install a large compressor, optimize the gathering system and you increase the capacity of the inlet separators. The capital investment is 3,600,000 $. You have the option of doing nothing (base case). You assignment is to use incremental analysis to analyze the base case and the two options and make a recommendation to your boss
	Cashflow, $
Year	Base Case	OPTION 1	OPTION 2
0	$0.00	-$1,400,000.00	-$3,600,000.00
1	$250,000.00	$1,000,000.00	$2,000,000.00
2	$250,000.00	$800,000.00	$1,500,000.00
3	$250,000.00	$400,000.00	$800,000.00
4	$250,000.00	$350,000.00	$700,000.00
5	$250,000.00	$250,000.00	$500,000.00
Total	$1,250,000.00	$1,400,000.00	$1,900,000.00
a. Use Incremental analysis and analyze the incremental investments from base case and each option
b. Calculate the NPV of the base case and the two options, and your incremental cashflows, at discount rates from 0 to 20% in steps of 2%.
c. Generate a graph with NPV@i versus discount rates for the base case and the two options. As well as your incremental analysis.
d. Clearly state what you would recommend and how your recommendation would change depending on the discount rate.