Question 4:
Cost benefit analyses allows the road agencies to prioritize rehabilitation projects based
on the return for every ringgit spent on the projects. Using a suitable discounted cash
flow technique, prioritise the following independent projects if only RM1.5 million is
available (5 marks).
Project
Capital Cost
Net Present Values
(RM)
(RM)
A
150,000
35,000
B
150,000
45,000
C
200,000
40,000
D
250,000
37,500
E
500,000
70,000
F
500,000
77,000
G
500,000
78,000
ii) Explain a suitable method to prioritise rehabilitation projects that have different
design lives? (3 marks)
iii) Explain the use of incremental method in discounted cash flow analysis. (2
marks)
