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 W transmission lines. The company has to choose between an Overhead Cable Trasmission System and Underground Cable Transmission System Table 03 shows the initial investment for each type, the expected envenues during its Metime 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 18 mai Benefit Cost Ratio mario (im) Internal rate of return IRR T mario) Determine which of the alternate is acceptable to the company based on the above results marial [Total 25 marks] 31 [Total 25 marks] Table 03: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,288 13,887 (million OMR) 831 1159 Annual Revenue -cost savings (million OMR) Increases by 2% per year Increases by 2% per year First 10 years 263 Annual Operating & Maintenance O&M Cost Succeeding years (million OMR) 3% increase per year First 10 years 172 Suoceeding years 1.5% increase per year Annual taxes (million OMR) 10% of (Annual Revenue + cost savings) 10% of (Annual Revenue cost savings) /HCA Life expectancy, years 50 40 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 W transmission lines. The company has to choose between an Overhead Cable Trasmission System and Underground Cable Transmission System Table 03 shows the initial investment for each type, the expected envenues during its Metime 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 18 mai Benefit Cost Ratio mario (im) Internal rate of return IRR T mario) Determine which of the alternate is acceptable to the company based on the above results marial [Total 25 marks] 31 [Total 25 marks] Table 03: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,288 13,887 (million OMR) 831 1159 Annual Revenue -cost savings (million OMR) Increases by 2% per year Increases by 2% per year First 10 years 263 Annual Operating & Maintenance O&M Cost Succeeding years (million OMR) 3% increase per year First 10 years 172 Suoceeding years 1.5% increase per year Annual taxes (million OMR) 10% of (Annual Revenue + cost savings) 10% of (Annual Revenue cost savings) /HCA Life expectancy, years 50 40
