Question

^{(Please Explain its answer from the examination point of view)}

Southern Ontario is planning to build a new solar power station the project will start in 2023 and is planned to take 3 years at a cost of $150 million per year. After project completion, the cost of maintenance and repairs is expected to be $10 million for the first year, and to increase by $100,000 per year thereafter. The salvage value of the station at the end of the year 2060 is estimated to be $30 million. The new solar station is expected to save the city $45 million per year. Consider the present to be the end of 2016/beginning of 2017 and the interest rate to be 6%.

Draw the cash flow for this project from the present until the end of 2060, Whats is the present and future worth of the project? Is it a good investment for the city to make?

Answer 1