Homework Answers
| Option 1 yearly cost increment in millions | 1 |
| Option 2 yearly cost increment in millions | 0.4 |
| Cost Of capital | 5% |
| NPV of Option 1 | $904.47 |
| NPV of Option 2 | $562.62 |
Option 2 is cheapest
| Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 |
| Option 1 Outflow( in millions) | 225 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | 114 |
| Option 2 Outflow( in millions) | 400 | 0.5 | 0.9 | 1.3 | 1.7 | 2.1 | 2.5 | 2.9 | 3.3 | 3.7 | 4.1 | 4.5 | 4.9 | 5.3 | 5.7 | 6.1 | 6.5 | 6.9 | 7.3 | 7.7 | 8.1 | 8.5 | 8.9 | 9.3 | 9.7 | 10.1 | 10.5 | 10.9 | 11.3 | 11.7 | 12.1 | 12.5 | 12.9 | 13.3 | 13.7 | 14.1 | 14.5 | 14.9 | 15.3 | 15.7 | 16.1 | 16.5 | 16.9 | 17.3 | 17.7 | 18.1 | 18.5 | 18.9 | 19.3 | 19.7 | 20.1 | 20.5 | 20.9 | 21.3 | 21.7 | 22.1 | 22.5 | 22.9 | 23.3 | 23.7 | 24.1 | 24.5 | 24.9 | 25.3 | 25.7 | 26.1 | 26.5 | 26.9 | 27.3 | 27.7 | 28.1 | 28.5 | 28.9 | 29.3 | 29.7 | 30.1 | 30.5 | 30.9 | 31.3 | 31.7 | 32.1 | 32.5 | 32.9 | 33.3 | 33.7 | 34.1 | 34.5 | 34.9 | 35.3 | 35.7 | 36.1 | 36.5 | 36.9 | 37.3 | 37.7 | 38.1 | 38.5 | 38.9 | 39.3 | 39.7 | 40.1 |
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