Problem #1 (30 marks) A general contractor in the energy sector is considering a long-term Build-Operate-Transfer investment option for building an electricity generating powerplant project in Alberta The minimum attractive rate of return (MARR) the company requires is 15% The annual rate of inflation for years 1-5 is 1.9% years 6-10 is 2.1%, years 11-12 is 2.2%, years 13-15 is 2 25%, years 16-20 is 20%. Calculate the NPV, IRR, and BCR (benefit-cost ratio) with the following cash flows Year(s) Items Initial cost Construction costs Cash Flows -$300,000 Year 1. $14,000,000 Year 2: -$34,000,000 Year 3. -$40,000,000 Year 4. $12,000,000 $1,200,000 Previous year's O&M costs 5 6-20 Annual operating and maintenance costs Annual operating and maintenance costs (indexed / adjusted for rate of infl Annual revenue 5-20 $16,000,000 A CPMT 3130 Cost Planning and Control 20 R emaining service value (RSV) $8,000,000 Note: RSV is similar to salvage value Should they go ahead with the investment?? Why or why not? Problem #1 (30 marks) A general contractor in the energy sector is considering a long-term Build-Operate-Transfer investment option for building an electricity generating powerplant project in Alberta The minimum attractive rate of return (MARR) the company requires is 15% The annual rate of inflation for years 1-5 is 1.9% years 6-10 is 2.1%, years 11-12 is 2.2%, years 13-15 is 2 25%, years 16-20 is 20%. Calculate the NPV, IRR, and BCR (benefit-cost ratio) with the following cash flows Year(s) Items Initial cost Construction costs Cash Flows -$300,000 Year 1. $14,000,000 Year 2: -$34,000,000 Year 3. -$40,000,000 Year 4. $12,000,000 $1,200,000 Previous year's O&M costs 5 6-20 Annual operating and maintenance costs Annual operating and maintenance costs (indexed / adjusted for rate of infl Annual revenue 5-20 $16,000,000 A CPMT 3130 Cost Planning and Control 20 R emaining service value (RSV) $8,000,000 Note: RSV is similar to salvage value Should they go ahead with the investment?? Why or why not