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Energy Australia is considering two alternative ways to meet its electricity demand. The first alternative is to build coal$-$fired plant $($Project C$)$ at a cost of $$1,000$ million. This plant would have a life of $20$ years and would provide after tax net cash flows of $$120$ million per year over its life. The second alternative is to build a gas$-$fired plant $($Project G$)$ that would cost $$400$ million and would produce after tax net cash flows of $$68$ million per year for $10$ years after which the plant would have to be replaced. The plan is to supply the power needed for exactly $20$ years and if inflation and productivity gains are expected to offset one another so as to leave expected cost and cash flows constant over the $20$ year period. The cost of capital for either plant is $10$ percent. What is the NPV of the coal fired plant $($Project C$)$ over the twenty$-$year life?

Select one:

a$.$ $$25\mathrm{.}62$ million

b$.$ $$24\mathrm{.}62$ million

c$.$ $$23\mathrm{.}65$ million

d$.$ $$18\mathrm{.}65$ million

e$.$ $$21\mathrm{.}62$ million

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Energy Australia is considering two alternative ways to meet its electricity demand. The first alternative is to build coal$-$fired plant $($Project C$)$ at a cost of $$1,000$ million. This plant would have a life of $20$ years and would provide after tax net cash flows of $$120$ million per year over its life. The second alternative is to build a gas$-$fired plant $($Project G$)$ that would cost $$400$ million and would produce after tax net cash flows of $$68$ million per year for $10$ years after which the plant would have to be replaced. The plan is to supply the power needed for exactly $20$ years and if inflation and productivity gains are expected to offset one another so as to leave expected cost and cash flows constant over the $20$ year period. The cost of capital for either plant is $10$ percent. What is the NPV of the coal fired plant $($Project C$)$ over the twenty$-$year life?

Select one:

a$.$ $$25\mathrm{.}62$ million

b$.$ $$24\mathrm{.}62$ million

c$.$ $$23\mathrm{.}65$ million

d$.$ $$18\mathrm{.}65$ million

e$.$ $$21\mathrm{.}62$ million