Toronto Hydro has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Toronto Hydro will make the upgrades themselves. This is expected to cost $12,500 at the end of every six months for 14 years. At the end of the operation (in 14 years) Toronto Hydro expects to sell all equipment needed for the upgrade for $100,000. Option 2: Pay experienced contractors. This will cost $43,000 up front and $10,300 semi-annually for 15 years. Assume all interest is 2.01% compounded semi-annually. 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) P/Y = C/Y = N = I/Y = % % PV = LA $ $ PMT = $ A PMT = HA 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 TA PMT A FV $ $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) 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) = $ 3) Which option should Toronto Hydro choose? Option 1 Option 2 Either option could be chosen > Next Question Toronto Hydro has two options for upgrading a hydro-electric power station to meet new government standards. Option 1: Toronto Hydro will make the upgrades themselves. This is expected to cost $12,500 at the end of every six months for 14 years. At the end of the operation (in 14 years) Toronto Hydro expects to sell all equipment needed for the upgrade for $100,000. Option 2: Pay experienced contractors. This will cost $43,000 up front and $10,300 semi-annually for 15 years. Assume all interest is 2.01% compounded semi-annually. 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) P/Y = C/Y = N = I/Y = % % PV = LA $ $ PMT = $ A PMT = HA 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 TA PMT A FV $ $ (If the NPV is negative, enter it as a negative number. If the NPV is zero, enter 0.) 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) = $ 3) Which option should Toronto Hydro choose? Option 1 Option 2 Either option could be chosen > Next