QUESTION $2$

The province of Ontario is planning to build a new wind farm at Niagara region. The construction of the wind farm will start by the beginning of $2022$ and will take $3$ years at a cost of $$200$ million per year. The cost of maintenance and repairs, which is to start after project completion, is expected to be $$5$ million for the first $6$ years, and to increase by $$50,000$ per year thereafter. The scrap value of the wind farm $($mainly metal parts of the wind turbines$)$ is estimated to be $$25$ million at the end of its service life. The project is expected to save the province $$55$ million per year in energy savings. Assuming the present to be the end of $2016/$beginning of $2017,$ the life of the project is till the end of year $2059,$ and the interest rate to be $5\%,$

a$)$ Draw a cash flow diagram for this project $($from present till $2059).$

$(7$ Marks$)$

b$)$ What is the Present Worth of the project?

$(8$ Marks$)$

c$)$ What is the Future Worth of the project?

$(7$ Marks$)$

d$)$ Is it a good investment for the province to make?

$(3$ Marks$)$