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(Note: please apply the PV factor/ discount factor whichever necessary in 4 decimal point).

PV= 1/(1+i)^n

Present Value of An Annuity of 1

PV=[1-(1/(1+i)^n)/i]

Question 1

Mr. Kevin is considering replacing the air conditioning system at this office building due to high running cost on the existing AC. The M & E Consultant for his office has suggested TWO (2) alternatives systems. Details for the alternatives as below:

Find the LCC for both systems and suggest the most suitable system for his office.

How much will be the cost different between both systems, in percentage?

	System A	System B
Initial installation cost	RM250,000	RM275,000
Annual running cost	RM25,000	RM20,000
Replacement of certain parts	Year Amount (RM) 5 10,000 10 25,000 20 40,000 30 40,000 35 45,000 40 50,000	Year Amount (RM) 10 15,000 20 20,000 30 35,000 40 40,000
Life span of building	40 years	45 years
Discount rate	7%	7%

Question 2

Based on the TWO (2) Investment options below:

• Find the net cash flow for both.
• Determine the NPV.
• Decide and justify which will be the best investment option for the client.

Investment Project ABC
Year	0	1	2	3	4
Cash Inflow		$600,000	$600,000	$600,000	$600,000
Cash Outflow	$1,000,000	$100,000	$100,000	$100,000	$100,000
Discount Rate	10%

Investment Project XYZ
Year	0	1	2	3	4
Cash Inflow			$600,000	$600,000	$600,000
Cash Outflow	$500,000	$500,000	$100,000	$100,000	$100,000
Discount Rate	10%

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