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Direct Energy has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Direct Energy will make the upgrades themselves.
Direct Energy has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Direct Energy will make the upgrades themselves. This is expected to cost $10,400 at the end of each month for 13 years. At the end of the operation (in 13 years) Direct Energy expects to sell all equipment needed for the upgrade for $113,000. Option 2: Pay experienced contractors. This will cost $27,000 up front and $9,300 monthly (at the end of every month) for 13 years. Assume all interest is 2.21% compounded monthly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1 : (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0 .) NPV( Option 1)=$ (rounded to the nearest whole number) 2) Find the net present value of option 2 : (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)
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