Problem
A water treatment plant is considering implementing a new treatment technology to treat water at lower costs. They are deciding between two options. Option A has an expected life of 8 years. It would cost $180,000 to install and yield net benefits of $40,000 at the end of each of the 8 years. Option B has an expected life of 24 years. It would cost $2.25 million to install and yield net benefits of $170,000 at the end of each of the 24 years. Using a real discount rate of 5 percent, which project offers larger net benefits?
(Hint: You may want to create a formula in Excel to calculate the present value of each year of net benefits. It will likely be faster than doing 24 separate calculations.)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.