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The Electric Company ventures to a new project in the eastern part of the capital city which is a 200-kilometer, 300 kV transmission lines. * 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.

Note : (cost of capital is same Minimum attractive rate of return MARR ) Using the following techniques for capital investment appraisal, perform the following;

(i) Discounted payback period; (ii) Net present value NPV; (iii) Internal rate of return IRR. (iv) Determine which of the alternative is acceptable to the company based on the above results.

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Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,908 12,156 (million OMR) Annual Revenue + cost 845 1422 savings (million OMR) Increases by 2% per Increases by 2% per year year First 10 years: First 10 years: 221 179 Annual Operating & Maintenance O&M Cost Succeeding years: Succeeding years: (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 Table Q3: Revenue & Expenses in Million OMR Overhead Underground Items Cable Transmission Cable Transmission System System Initial Investment 9,908 12,156 (million OMR) Annual Revenue + cost 845 1422 savings (million OMR) Increases by 2% per Increases by 2% per year year First 10 years: First 10 years: 221 179 Annual Operating & Maintenance O&M Cost Succeeding years: Succeeding years: (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

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