Toronto Hydro has two options for upgrading a nuclear power station to meet new government standards. Option 1: Toronto Hydro will make the upgrades themselves. This is expected to cost $10,000 at the end of every six months for 15 years. At the end of the operation (in 15 years) Toronto Hydro expects to sell all equipment needed for the upgrade for $114,000. Option 2: Pay experienced contractors. This will cost $38,000 up front and $12,600 semi-annually (at the end of every six months) for 14 years. Assume all interest is 2.65% 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 where ever applicable .1) Find the net present value of option 1:

	Payments (Cost)	Sale of equipment (Residual)
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 1) = $ (rounded to the nearest whole number) 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) = $ (round to the nearest whole number)

3) Which option should Toronto Hydro choose?

• Option 1
• Option 2
• Either option could be chosen