(a) check both proposal whether they are economically viable as an individual project at an interest rate...

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Question:

(a) check both proposal whether they are economically viable as an individual project at an interest rate of 7% per year.

(b) select the best project to be implemented at an interest rate of 7% per year based on incremental analysis.

Through the plan for the development of 10th Malaysia, two project proposals are identified for implementation. The both proposed projects are to build federal highways and the national youth development network. Highway construction project requires the initial cost of RM50 million with an annual maintenance cost of RM1.0 million and duration of life 25 years. Toll collection is expected to be obtained of RM3.0 million per annum, R&R business rental collection of RM2.5 million per year, total summons for exceeding the national speed limits of RM500,000 per annum, and fuel consumption reduction policy (petrol and diesel) by highway users is RM900,000 per year.

However the rate of accidents and property damage are estimated at RM500,000 per annum, the landslide of rocks during rainfall RM300,000 per annum, RM800,000 per year of insurance claims from policyholders of the highway drivers. For the project of national youth development network, the initial cost of infrastructure developments such as construction of building facilities, racetrack motorcycle, and other facilities are RM30 million, annual maintenance cost of RM750,000, and 15 years for life period. The benefit of the second proposal,

it is estimated that 60% reduction in criminal rate will be obtained where the total criminal cost is RM10 million per year. The total cost of criminal damage is due to public property damaging and some facilities provided by the government. In addition, the income loss of multimedia company that provides IT facilities will be RM200,000 per annum and this will result in a loss of tax revenue of RM100,000 per annum.