Question
SEQwater is considering 3 mutually-exclusive plans A, B and C to extend the life of an old dam and some recreational facilities around it. The
SEQwater is considering 3 mutually-exclusive plans A, B and C to extend the life of an old dam and some recreational facilities around it. The initial capital cost for all 3 projects is $50 million and the life extension for plans A, B and C will be for 6, 8 and 12 years respectively. From year 1 onwards, there will be annual maintenance cost of $3 million, $10 million and $15 million and annual benefits from tourism worth $15million, $4million and $10million respectively for A, B and C. Create a net cash flow table for all the plans. Assuming a 5% cost of capital, how would you rank all the plans and why? Use two different methods to calculate your final numerical values.
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