As a special advisor to Special Road Infrastructure Development, you have been approached by the Minister...

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As a special advisor to Special Road Infrastructure Development, you have been approached by the Minister to evaluate the financial viability of three alternative road improvement projects. Project data are captured in Table 3.1: Table 3.1: Municipal Road improvement project Initial cost R R Annual 200 000 for the maintenance costs, first 18 years then 250 000 over the remaining 12 years Annual Energy Costs, R. Alternative A Salvage Value, R 7 500 000 Economic Life, years Annual Revenue, R 350.000 200 000 950 000 30 Alternative B 8 500 000 R190 000 for the first 20 years and R220 000 over the remaining years 15 years 180 000 450 000 1200 000 35 Alternative C 9 500 000 R170 000 for the first 30 years and R190 000 over the remaining years 10 years 160 000 600 000 1 400 000 40 Discount rate p.a. 12.5% 12.5% 12.5% Using Net Present Value analysis, determine which of the project alternatives is worth implementation. (Hint: F = P (1+i); P = A [ (1+i)" 1] / [ i * (1+i)n]) As a special advisor to Special Road Infrastructure Development, you have been approached by the Minister to evaluate the financial viability of three alternative road improvement projects. Project data are captured in Table 3.1: Table 3.1: Municipal Road improvement project Initial cost R R Annual 200 000 for the maintenance costs, first 18 years then 250 000 over the remaining 12 years Annual Energy Costs, R. Alternative A Salvage Value, R 7 500 000 Economic Life, years Annual Revenue, R 350.000 200 000 950 000 30 Alternative B 8 500 000 R190 000 for the first 20 years and R220 000 over the remaining years 15 years 180 000 450 000 1200 000 35 Alternative C 9 500 000 R170 000 for the first 30 years and R190 000 over the remaining years 10 years 160 000 600 000 1 400 000 40 Discount rate p.a. 12.5% 12.5% 12.5% Using Net Present Value analysis, determine which of the project alternatives is worth implementation. (Hint: F = P (1+i); P = A [ (1+i)" 1] / [ i * (1+i)n])

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