Question: (Note: please apply the PV factor/ discount factor whichever necessary in 4 decimal point). PV= 1/(1+i)^n Present Value of An Annuity of 1 PV=[1-(1/(1+i)^n)/i] Question
(Note: please apply the PV factor/ discount factor whichever necessary in 4 decimal point).
PV= 1/(1+i)^n
Present Value of An Annuity of 1
PV=[1-(1/(1+i)^n)/i]
Question 1
Mr. Kevin is considering replacing the air conditioning system at this office building due to high running cost on the existing AC. The M & E Consultant for his office has suggested TWO (2) alternatives systems. Details for the alternatives as below:
Find the LCC for both systems and suggest the most suitable system for his office.
How much will be the cost different between both systems, in percentage?
|
| System A | System B | ||||||||||||||||||||||||
| Initial installation cost | RM250,000 | RM275,000 | ||||||||||||||||||||||||
| Annual running cost | RM25,000 | RM20,000 | ||||||||||||||||||||||||
| Replacement of certain parts |
|
| ||||||||||||||||||||||||
| Life span of building | 40 years | 45 years | ||||||||||||||||||||||||
| Discount rate | 7% | 7% |
Question 2
Based on the TWO (2) Investment options below:
- Find the net cash flow for both.
- Determine the NPV.
- Decide and justify which will be the best investment option for the client.
| Investment Project ABC | |||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash Inflow |
| $600,000 | $600,000 | $600,000 | $600,000 |
| Cash Outflow | $1,000,000 | $100,000 | $100,000 | $100,000 | $100,000 |
|
Discount Rate |
10% |
|
|
|
|
| Investment Project XYZ | |||||
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash Inflow |
|
| $600,000 | $600,000 | $600,000 |
| Cash Outflow | $500,000 | $500,000 | $100,000 | $100,000 | $100,000 |
|
Discount Rate |
10% |
|
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
Study Help