4. Imagine that there are two approaches to solving a particular environmental problem. The first approach involves an initial investment of $400M and ongoing costs of $2M each year over a 10-year lifetime. The second approach involves an initial investment of $300M and ongoing costs of $15M each year over a 10-year lifetime. Neither project has any residual value or remediation costs at the end of 10 years.

A. Assuming that the projects are otherwise similar with regard to reliability, sustainability and robustness, how do the present value of the costs of each project compare? How does your answer depend on the interest rate you use to discount future time periods?

B. Can you determine at what interest rate do the two projects have equal costs?