What is the proper pv of costs for the better project

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Reference no: EM132769628

Problem 1: Mid-State Electric Company must clean up the water released from its generating plant. The company's required rate of return is 10% for average projects, and that rate is normally adjusted up or down by 2% for high-risk and low-risk projects. Clean up Plan A, which is of average risk, has an initial cost of -$1,000 at time 0, and its operating cost will be -$100 per year for its 10-year life. Plan B, which is a high-risk project, has an initial cost of -$300, and its annual operating cost over Years 1 to 10 will be -$200. What is the proper PV of costs for the better project?

a. $1,430.04
b. $1,525.88
c. $1,614.46
d. $1,642.02
e. -$1,728.19

Reference no: EM132769628

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