Option A: Keep operating an old, coal-fired electricity generation plant.
Option B: Build new, clean electricity generation infrastructure.Each option will provide $100 million of electricity benefits to the State each yearfor the next 20 years. The costs, however, differ for each project as shown in thetable on the next page.
a) Use a 10% discount rate to calculate the Present Value of the costs of Option Aand Option B and state which option the government should choose.
b) Now use a 5% discount rate to
