The Oman National Grid Company ventures to a new project in thesouthern part of the Sultanate which is a 250-kilometer, 132kilovolts transmission lines. The company has to choose between anOverhead transmission system and Underground transmission system.Table Q2 shows the initial investment for each type, the expectedrevenues during its lifetime which includes the cost savingsincurred by underground transmission system over the overheadtransmission system. The company has estimated a salvage value foreach type of transmission to be 5% of the initial investment. As acompany policy the minimum attractive rate of return MARR is 8% peryear. Determine which of the two alternatives is acceptable to thecompany using the following methods; (i) Simple payback period; [7](ii) Benefit cost ratio; [6] (ii) Net present value NPV; [6] (iii)Internal rate of return IRR
| Items | Overhead | Underground Transmission |
| Transmission | System |
| System | |
| Initial Investment | 9,993 | 11,722 |
| (million OMR) |
| Annual revenue + cost savings | 980 | 1238 |
| (million OMR) |
| Annual Operating & Maintenance O&M Cost/Depreciation/ | 256 | 181 |
| taxes |
| (million OMR) |
| Life expectancy, n | 40 | 30 |
| (years) |
