A diesel generator that produces electrical power can be purchased (it currently buys power from an external source) by a remote community for $480,000 and will be used for 10 years, at which point its salvage value will be 50 000 $. Or it can be rented for $70,000 per year. (Remember that lease payments occur at the beginning of the year). The community interest rate is 8%. 

Show your calculations in your working document. You can, however, create your table in MS Excel, but you will have to copy and paste it into your working document. a. Using the TRI method, choose the best option. b. The community will spend $80,000 less each year on fuel and maintenance than what it currently spends buying electricity from a third party. What would be the TRI of purchasing the generator assuming it is a standalone project? vs. Repeat b) but for the rental of the generator.

Answer rating: 100% (QA)

Choosing the Optimal Option for Power Generation To determine the best option for the remote community we will compare the two scenarios purchase and ... View the full answer