Question: A turnkey contractor was awarded a contract to construct a bridge crossing the river which separated the town with deferred terms of payment over a

A turnkey contractor was awarded a contract to construct a bridge crossing the river which separated the town with deferred terms of payment over a period of 4 years after the completion of the bridge. The contractor is responsible to maintain the bridge before handing it over to the authority. The consultant engineer has proposed 2 different types of bridge for the contractor to consider. The 2 proposals have 2 different estimated cash-flow as follows:

Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM)

Using 4 diff. Evaluation methods, suggest the proposal giving the highest return to the contractor. Assume that the cost of fund to the contractor is at 10% per annum. Give your reasons. What happen if the cost of fund is estimated to increase to 18%?

Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM) 2.000.000 2.000.000 year 3 (RM) 2.000.000 2.000.000 Year 4(RM) 2.000.000 2.500.000 Year 5(RM) 2.000.000 2.500.000 Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM) 2.000.000 2.000.000 year 3 (RM) 2.000.000 2.000.000 Year 4(RM) 2.000.000 2.500.000 Year 5(RM) 2.000.000 2.500.000 Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM) 2.000.000 2.000.000 year 3 (RM) 2.000.000 2.000.000 Year 4(RM) 2.000.000 2.500.000 Year 5(RM) 2.000.000 2.500.000 Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM) 2.000.000 2.000.000 year 3 (RM) 2.000.000 2.000.000 Year 4(RM) 2.000.000 2.500.000 Year 5(RM) 2.000.000 2.500.000 Proposal A Proposal B Year 1 (RM) -5.000.000 -5.600.000 Year 2 (RM) 2.000.000 2.000.000 year 3 (RM) 2.000.000 2.000.000 Year 4(RM) 2.000.000 2.500.000 Year 5(RM) 2.000.000 2.500.000

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