explain what you would need to do to convince the governmentto decide on Option B.

Suppose the State government is deciding between two possible electricity generation options:Option A: Keep operating an old, coal-fired electricity generation plant.Option B: Build new, clean electricity generation infrastructure.Each option will provide $100 million of electricity benefits to the State each yearfor the next 20 years. The costs, however, differ for each project as shown in thetable on the next page.a) Use a 10% discount rate to calculate the Present Value of the costs of Option Aand Option B and state which option the government should choose.b) Now use a 5% discount rate to calculate the Present Value of the costs Option Aand Option B and state which option the government should choose.c) Imagine you are the leader of an environmental lobby group. Use the answersabove to help explain what you would need to do to convince the governmentto decide on Option B.b) Now use a 5% discount rate to calculate the Present Value of the costs Option Aand Option B and state which option the government should choose.c) Imagine you are the leader of an environmental lobby group. Use the answers above help explain what you would need to do to convince the governmentto decide on Option B.


 

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