Discussion

Explanation:

Forgone Earnings (F) = Earnings with new technology – Earnings without new technology

Let X = (Earnings without new technology for 5 years),

Let Y and Z be A’s and B’s respective earnings with new technology.

FA = Y – X

FB = Z – X

FA – FB = Y – Z

Both A and B use the new technology in the first 2 years. For the last 3 years, only A uses the technology.

Y = (Earnings with new technology for first 2 years) + (Earnings with new technology for last 3 years)

Z = (Earnings with new technology for first 2 years) + (Earnings without new technology for last 3 years)

∴ Y – Z = (Earnings with new technology for last 3 years) – (Earnings without new technology for last 3 years)

Earnings of the third year, with (or without) new technology, are placed at compound interest for 2 years. Similarly, earnings of the fourth year are placed at C.I. for 1 year and earnings of the last year do not earn any interest.

∴ Y – Z = [(150 × 1.12 + 150 × 1.1 + 150) – (50 × 1.12 + 50 × 1.1 + 50)] ×1000 million

= [(100) × 1.12 + (100) × 1.1 + 100)] ×1000 million

= 331000 million

Hence, option (b).

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