A company is preparing a tender to carry out some routine maintenance on some major infrastructure over a ten year period. The work will require a new item of plant which will be expensive to purchase and operate. It will be sold at the end of the 10 year contract. To calculate the costs as closely as possible they are considering alternative items of plant. The cost details of the plant items being considered are: Plant A Plant B 350,000 500,000 Initial cost 12,000 8,500 20,000 Annual operating costs at today's prices Maintenance costs at a contract prices Maintenance costs at | today's prices Major overhaul every 3 years at today's prices Estimated sale price after 10 years at today's prices 21,000 45,000 120,000 210,000 The payments received under the proposed contract will not be affected by the choice between item A and item B. The company borrows funds at 12% p.a. Inflation over the next 10 years is expected to be fairly stable at 2% p.a. (a) Which option should the company allow for in the preparation of the tender submission? (20 marks) (b) What Net Present Value should be included in the costs for this plant? (20 marks)