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Your manager has requested you to analyze two potential investment options and indicate which one should be selected from the standpoint of NPW. However, since
Your manager has requested you to analyze two potential investment options and indicate which one should be selected from the standpoint of NPW. However, since your Company's worth of money availability (interest i) is not clearly identified, you are requested to do a parametric analysis for i ranging from 1% to 15%. The data you are given are: Cash Flow Items Investment cost ($) O&M ($/yr) G on O&M ($/yr) Option A 500,000 30,000 +2,000 Option B 900,000 45,000 +3,000 Assume that O&M cost is reset to original value after each Extraordinary Maintenance, then is subject to G again. Extraordinary Maintenance ($) 5,000 7,000 Extraordinary Maintenance frequency (yrs) 3 5 Benefits ($/yr) g on Benefits (%/yr) 110,000 +3% first 5 yrs, then -5% till end 180,000 +3% first 5 yrs, then -5% till end Salvage at end of Investment Life ($) 8% of Investment 10% of Investment Investment Life (yrs) 10 10 Graph the two NPW(i) functions and indicate the intervals of i within which one Option is better than the other
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