Question 3: The Muscat Electric Company ventures to a new project in the eastern part of the capital city which is a 200-kilometer, 300 kV transmission lines. The company has to choose between an Overhead Cable Transmission System and Underground Cable Transmission System. Table Q3 shows the initial investment for each type, the expected revenues during its lifetime which includes the cost savings incurred by underground transmission system over the overhead transmission system. The company has estimated a salvage value for each type of transmission to be 5% of the initial investment. As a company cost of capital is 8% per year. Using the following techniques for capital investment appraisal, perform the following: Simple Payback Period [8 marks] Benefit-Cost Ratio [7 marks] m) Internal rate of return IRR 17 marks (iv) Determine which of the alternative is acceptable to the company based on the above results. [3 marks] [Total 25 marks] Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,577 13,783 (milion OMR) Annual Revenue + cost 900 1275 savings (milion OMR) increases by 2% per year Increases by 2% per year First 10 years: First 10 years: 298 173 Annual Operating & Maintenance O&M Cost Succeeding years: Succeeding years: (milion OMR) 3% increase per year 1.5% increase per year Annual taxes (milion OMR) 10% of (Annual Revenue 10% of (Annual + cost savings) Revenue + cost savings) Life expectancy, years 50 40