Direct Energy has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Direct Energy will make the upgrades themselves. This is expected to cost $12,800 at the end of every three months for 12 years. At the end of the operation (in 12 years) Direct Energy expects to sell all equipment needed for the upgrade for $124,000 Option 2: Pay experienced contractors. This will cost $45,000 up front and $9,900 quarterly for 15 years. Assume all interest is 3.84% compounded quarterly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1: Payments (Cost) Sale of equipment (Residual) PAY = CY = N = I/ E 96 % PV = PMT= $ FV = $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) NPV (Option 1) = $ 2) Find the net present value of option 2: Payments (Cost) P/Y C/Y N I/Y % PV PMT FV (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) NPV (Option 2) = $ Which option should Direct Energy choose? Option 1 Option 2 Either option could be chosen Direct Energy has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Direct Energy will make the upgrades themselves. This is expected to cost $12,800 at the end of every three months for 12 years. At the end of the operation (in 12 years) Direct Energy expects to sell all equipment needed for the upgrade for $124,000 Option 2: Pay experienced contractors. This will cost $45,000 up front and $9,900 quarterly for 15 years. Assume all interest is 3.84% compounded quarterly. Round the answers to NPV (Option 1), and NPV (Option 2) to the nearest dollar. Round all other answers to two decimal places where applicable. 1) Find the net present value of option 1: Payments (Cost) Sale of equipment (Residual) PAY = CY = N = I/ E 96 % PV = PMT= $ FV = $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) NPV (Option 1) = $ 2) Find the net present value of option 2: Payments (Cost) P/Y C/Y N I/Y % PV PMT FV (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) NPV (Option 2) = $ Which option should Direct Energy choose? Option 1 Option 2 Either option could be chosen