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Question 2: The Oman National Grid Company ventures to a new project in the southern part of the Sultanate which is a 250 kilometer, 132 kilovolts transmission lines. The company has to choose between an Overhead transmission system and Underground transmission system. Table Q2 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 policy the minimum attractive rate of return MARR is 8% per year. Determine which of the two alternatives is acceptable to the company using the following methods (1) Simple payback period; (11) Benefit cost ratio: (11) Net present value NPV; (11) Internal rate of return IRR. 925 Question 2: The Oman National Grid Company ventures to a new project in the southern part of the Sultanate which is a 250 kilometer, 132 kilovolts transmission lines. The company has to choose between an Overhead transmission system and Underground transmission system. Table Q2 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 policy the minimum attractive rate of return MARR is 8% per year. Determine which of the two alternatives is acceptable to the company using the following methods (1) Simple payback period; (11) Benefit cost ratio: (11) Net present value NPV; (11) Internal rate of return IRR. 925 Table Q2 Overhead Transmission System 9,374 Underground System Items Initial Investment (million OMR) 11,114 999 1213 Annual revenue + cost savings (million OMR) Annual Operating & Maintenance O&M Cost/Depreciation/ taxes (million OMR) Life expectancy, n (years) 194 [Total 25 marks]

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