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 2.0%. Calculate the NPV, IRR, and BCR (benefit-cost ratio) with the following cash flows: Year(s) Items Cash Flows Initial cost -$300,000 1-4 Construction costs Year 1: $14,000,000 Year 2: $34,000,000 Year 3: $40,000,000 Year 4: $12,000,000 Annual operating and maintenance costs $1,200,000 6-20 Annual operating and maintenance costs Previous year's O&M costs (indexed / adjusted for rate of inflation) + rate of inflation 5-20 Annual revenue $16,000,000 CPMT 3130 30 Cost Planning and Control 20 . Remaining service value (RSV) 1992 $8,000,000 Note: RSV is similar to salvage value Should they go ahead with the investment?? Why or why not