Economic Evaluation of Hydroelectric and Thermal Projects

Name:
Student #:
49003 ECONOMIC EVALUATION
Assignment # 2 (Autumn 2018)
Due: 4 June 2018 (no later than 4.00 pm)
ANSWER-SHEET
Please summarize your results in the table below: (5 Marks)
Financial Economic
Proposal A Proposal B Proposal A Proposal B
NPV
-
$13278591307.
74
-
$13334144160.
54
-
$17722819531.
60
-
$19333852262.
74
IRR 10% 10% 7% 6%
PB 9.97 9 13.57 15.63
B/C -0.44 -.044 -0.59 -.64
Equivalent Annual Cost -
$2390262720.8
0
-
2400262720.80
-
$3190262720.8
0
-
$3480262720.8
0
Consumer Surplus
$100000000000
00
$135000000000 $100000000000
00
$135000000000
Producer Surplus
$100000000000
00
$135000000000 $100000000000
00
$135000000000
Total Surplus
$200000000000
00
$270000000000 $200000000000
00
$270000000000
49003-Assignmen 2-A2018-Answer Sheet Page 1 of 5

Note: NPV; Equivalent Annual Cost; Consumer, Producer, and Total Surplus - must be rounded off to
the nearest billion dollars (i.e., no decimals), and IRR and PB - to the nearest ‘whole’ percent and years
(i.e., no decimals), and B/C - to one decimal point, respectively.
1. Which proposal will you recommend from the investor’s perspective? (2 Marks)
A B Either Neither
Why? Because As per NOV proposal a is more beneficial than proposal B.
___________________________________________________________
________________________________________________________ (no more than 10 words)
2. Will your recommendation, based on economic perspective, change if – due to unanticipated
economic reasons – there is hyperinflation after the first twenty years of the project life span? (2
Marks)
Yes No
Why? Because as per economic evaluation total surplus is more in the proposal
B.____________________________________________________________
________________________________________________________ (no more than 10 words)
3. Will your recommendations, based on economic perspective change if the government fails to
convert the monopoly market into oligopoly and competitive markets (i.e., the market will remain
a monopoly throughout the project life spans)? (2 Marks)
Yes No
Why? Because _it will not affect the outcome of the
result.____________________________________________________________
_______________________________________________________ (no more than 10 words)
4. Will your recommendation (based on financial perspective) change if evaluation is carried out in
future value terms rather than present value terms. (2 Marks)
Yes No
Why? Because _the result of the financial outcome would remain same.
____________________________________________________________
49003-Assignmen 2-A2018-Answer Sheet Page 2 of 5