Question 3: The Muscat Electric Company ventures to a new project in the easternpart of the capital city which is a 200-kilometer, 300kVtransmission lines. The company has to choose between an Overhead Cable Transmission System and Underground Cable Transmission System. Table Q3shows 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 capitalis 8% per year. Using the followingtechniques for capital investment appraisal, perform the following; (i)SimplePayback Period; [8marks] (ii) Average Rate ofReturn; [7 marks] (iii) Benefit Cost Ratio;. [7marks] (iv) Determine which of the alternative is acceptable to the company based on the above results.[

lutions O 150% 2 / 2 ative is acceptable to the company based on the above results. Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,545 12,805 (million OMR) 890 1286 Annual Revenue + cost savings (million OMR) Increases by 2% per year Increases by 2% per year First 10 years 158 First 10 years 289 Succeeding years: Succeeding years: Annual Operating & Maintenance O&M Cost (million OMR) 3% increase per year 1.5% increase per year Annual taxes (million OMR) 10% of (Annual Revenue + cost savings) 10% of (Annual Revenue + cost savings) Life expectancy. years 50 40 L lutions O 150% 2 / 2 ative is acceptable to the company based on the above results. Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,545 12,805 (million OMR) 890 1286 Annual Revenue + cost savings (million OMR) Increases by 2% per year Increases by 2% per year First 10 years 158 First 10 years 289 Succeeding years: Succeeding years: Annual Operating & Maintenance O&M Cost (million OMR) 3% increase per year 1.5% increase per year Annual taxes (million OMR) 10% of (Annual Revenue + cost savings) 10% of (Annual Revenue + cost savings) Life expectancy. years 50 40 L