ura Holding is considering three locations for new project on building a dam. The three alternatives for the dams for the locations cost RM25 millions, RM30 millions, RM32millions. Currently flood damage amounts to RM20 millions per year. If the new dams are built, the flood damage will be reduced to RM17millions, RM16 millions and RM15 millions per year respectively. Sakura Holding is getting a loan by 5% interest for 10 years to proceed with the preferred location. (i) Show the equation form of B/C ratio to perform the analysis. (ii) Calculate the individual benefits/ cost ratios for each alternative in details and justify your preferred location based on the analysis. (iii) Determine the best location to build the dam based on incremental B/C ratio analysis and compare you answer with Q2 b(ii).
Sakura Holding is considering three locations for new project on building a dam. The three alternatives for the dams for the locations cost RM25 millions, RM30 millions, RM32millions. Currently flood damage amounts to RM20 millions per year. If the new dams are built, the flood damage will be reduced to RM17millions, RM16 millions and RM15 millions per year respectively. Sakura Holding is getting a loan by 5% interest for 10 years to proceed with the preferred location.
(i) Show the equation form of B/C ratio to perform the analysis.
(ii) Calculate the individual benefits/ cost ratios for each alternative in details and justify your preferred location based on the analysis.
(iii) Determine the best location to build the dam based on incremental B/C ratio analysis and compare you answer with Q2 b(ii).
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