Question

Two projects have the estimated details as shown in Table 2.2. Construct cash flow diagrams for the two projects and use present worth (PW) analysis to determine which project should be selected at the rate of 12% per year

Table 2.2: Details for Project R and Project S

	Project R	Project S
Initial cost (RM)	30,000	20,000
Annual cost (RM)	7,000 for first year, increasing by 1,000 per year for subsequent years	0 for the first 3 year, 5,000 from year 4 to year 7 1,000 for year 8
Special maintenance (RM)	0	5,000 every 2 year
One-off maintenance (RM)	3,000 in year 3	0
Yearly income (RM)	8,500	7500
Salvage Value (RM)	4,000	0
Life (years)	4	8

Answer 1

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