Please solve it You are currently working in a construction company. Your company have been appointed toa Build-Operate-Transfer project for UPM for the renovation of a student hostel. The contractinvolves an 80%-20% financing, in which your company will be financing 20% of the initialcost and will be allowed to collect the lease from the tenants for the first 7 years. You havereceived 3 different renovation designs for the hostel, each with different initial cost andprojected yearly return from the concession as shown in Table 1 below.Table 1: Projected yearly return based on the design type (RM 'million)Design A(Initial cost RM5 mil)290,000290,000300,000290,000310,000320,000330,000Design B(Initial cost RM4.8 mil)300,000290,000290,000280,000290,000280,000300,000Design C(Initial cost RM5.5 mil)300,000310,000310,000300,000290,000300,000290,000Year13467Your boss had requested you to select the best design that will give the best profit to thecompany. For this matter, you have decided to use Net Present Value (NPV) method todecide which is the best design to be used.a) Explain what NPV method is and how it can be used to assess an investmentdecision.b) Evaluate the NPV for design A, B and C. Assume that the maintenance cost of thehostel for all the design is 10% from each yearly return.c) Based on the NPV evaluation in b), decide which is the best design to be used.

b). Design A Year Returns Discounting factor Inflow 1 290000 0.909 263610 2 290000 0.826…

You are currently working in a construction company. Your company have been appointed to a Build-Operate-Transfer project for UPM for the renovation of a student hostel. The contrao involves an 80%-20% financing, in which your company will be financing 20% of the initial cost and will be allowed to collect the lease from the tenants for the first 7 years. You have received 3 different renovation designs for the hostel, each with different initial cost and projected yearly return from the concession as shown in Table 1 below. Table 1: Projected yearly return based on the design type (RM `million) Design B (Initial cost RM4.8 mil) Design C (Initial cost RM5.5 mil) Year Design A (Initial cost RM5 mil) 290. 000 300 000 300 00O

You are currently working in a construction company. Your company have been appointed to a Build-Operate-Transfer project for UPM for the renovation of a student hostel. The contrao involves an 80%-20% financing, in which your company will be financing 20% of the initial cost and will be allowed to collect the lease from the tenants for the first 7 years. You have received 3 different renovation designs for the hostel, each with different initial cost and projected yearly return from the concession as shown in Table 1 below. Table 1: Projected yearly return based on the design type (RM `million) Design B (Initial cost RM4.8 mil) Design C (Initial cost RM5.5 mil) Year Design A (Initial cost RM5 mil) 290. 000 300 000 300 00O

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 17DQ

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