Neco Model Questions Vol1 2024 Geography Question 49

A community faces a flood hazard. The probability of a severe flood in any year is 0.02 and the expected damage cost if a flood occurs is \(\text{₦}150\) million.\nOption 1: Build a flood barrier costing \(\text{₦}30\) million (year 0) that reduces the flood probability to 0.005 (damage cost unchanged).\nOption 2: Install a drainage system costing \(\text{₦}45\) million (year 0) that leaves the probability at 0.02 but cuts the damage cost by 40 %.\nAssuming a discount rate of 5 % per annum and a 20‑year planning horizon, calculate the net present value (NPV) of the expected total cost for each option (including the upfront investment). Which single option gives the lower NPV? Give the preferred option and its NPV (rounded to two decimal places, in millions of naira).