L & M Power In the next two years, a large municipal gas company must begin constructing new gas storage facilities to accommodate the Federal Energy Regulatory Commission€™s Order 636 deregulating the gas industry. The vice-president in charge of the new project believes there are two options. One option is an underground deep storage facility (UDSF) and the other is a liquified natural gas facility (LNGF). The vice-president has developed a project selection model and will use it in presenting the project to the president. For the models she has gathered the following information:

Since the vice-president€™s background is in finance, she believes the best model to use is a financial one, net present value analysis.
Would you use this model? Why or why not? Base your answer on the five criteria developed by Souder and evaluate this model in terms of thecriteria.

Operating InitialExpected Salvage Value Cu. Ft $0.004 Cost Life $10,000,000 UDSF LNGF 25,000,000 0.002 15 20 years 10%