Which option has the lowest overall cost

Reference no: EM13546742

Two remediation options are being considered for a contaminated land area formerly used for industrial operations. Option 1 involves removing all of the contaminated soil over a two-year period at a cost of 2.2$ million per year. Option 2 is to leave the soil in place but treat it with a bioremediation agent at a cost of 950,000$/year over a three-year period. Subsequently, the soil would be sampled each year for the next five years to ensure the effectiveness of the treatment system. The cost of the sampling program would be 240,000$ the first year and 120,000 $/year for the remaining four years.

a)Calculate the net present value of each option based on a discount rate of 5% . (Hint: draw a cash flow diagram for each of the two options.)

Option 1, NPV = $

Option 2, NPV = $

b)Which option has the lowest overall cost? What is the difference in total cost between the two options based on NPV( percentage)?

Reference no: EM13546742

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