Greater Sudbury Hydro has two options for upgrading a nuclear power station to meet new government standards. Option 1: Greater Sudbury Hydro will make the upgrades themselves. This is expected to cost $14,500 at the end of every three months for 13 years. At the end of the operation (in 13 years) Greater Sudbury Hydro expects to sell all equipment needed for the upgrade for $100,000. Option 2: Pay experienced contractors. This will cost $29,000 up front and $14,900 quarterly (at the end of every three months) for 12 years. Assume all interest is 2.25% 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:

Payments (Cost) Sale of equipment (Residual)P/Y = C/Y = N = I/Y =%%PV =$$PMT =$$FV =$$

(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:

Payments (Cost) P/Y C/Y N I/Y% PV$ PMT$ FV$

(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 Greater Sudbury Hydro choose?

• Option 1
• Option 2
• Either option could be chosen