The state government of Pahang is planning to build a new concrete dam for hydroelectric facility in Jerantut district. Besides generating power, the dam which equipped with flood control system also be built for tourism attraction. The government already identified 2 potential, locations, A or B. The estimated benefits and costs for both locations under consideration are shown in Table 3. The interest Q4 (a) rate for 20 years and 40 years life span are 5% and 7% respectively. Table 3: Estimated costs and benefits Cost and Benefit (RM Location million) A В Initial cost 180 210 Operational and maintenance costs per year Power sales per year 1.1 1.5 1.0 Environmental impact per year 1.5 2.3 Recreation benefits per year 2.5 3.1 Irrigation benefits per year 3.2 4.1 Flood control per year 1.5 1.2 (i) Determine the cost, benefit and disbenefit for 20 and 40 years of project life span using present worth (PW) method. (ii) Justify the most suitable location based on the benefit-cost analysis.
The state government of Pahang is planning to build a new concrete dam for hydroelectric facility in Jerantut district. Besides generating power, the dam which equipped with flood control system also be built for tourism attraction. The government already identified 2 potential, locations, A or B. The estimated benefits and costs for both locations under consideration are shown in Table 3. The interest Q4 (a) rate for 20 years and 40 years life span are 5% and 7% respectively. Table 3: Estimated costs and benefits Cost and Benefit (RM Location million) A В Initial cost 180 210 Operational and maintenance costs per year Power sales per year 1.1 1.5 1.0 Environmental impact per year 1.5 2.3 Recreation benefits per year 2.5 3.1 Irrigation benefits per year 3.2 4.1 Flood control per year 1.5 1.2 (i) Determine the cost, benefit and disbenefit for 20 and 40 years of project life span using present worth (PW) method. (ii) Justify the most suitable location based on the benefit-cost analysis.
Chapter1: Financial Statements And Business Decisions
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