Model for Housing Estate Population Analytics ('000 thousands) over 12 yearsTotalYearly Population by EstatesEstates \ Years123456789101112AverageHighestLowestMedianStdevTown A2602612562642592672632602652562592613131.00260.92267.00256.00260.503.23

Personal Alert Buttons (PAB) are to be installed to tackle the problem of senior citizens dying or getting seriously injured at home without anyone noticing.

About 65% to 80% of the households in Town A are estimated to have at least one senior citizen. The average population to household (or flat) ratio is 3.0

Each eligible flat will only be installed with one such device.

Phase 1 of the PAB project will last 6 years. The PAB device will be produced and fully installed by an external vendor within the first year. Each device costs $280, inclusive of installation. Government will pay the vendor for all installed devices in equal yearly instalments over 5 years with no added interest penalty. Flat owners only have to co-pay 10% of the device cost each year over 3 years for a total of just 30%. The remaining 70% of the costs will be funded by government.

In a large installation, approximately 12% of all installed devices can be expected to fail each year. The vendor will bear the cost of repairs in the first year. Government will be responsible for repair costs from the second year onwards till the end of the project. Average repair cost starts at $30 per device in year 2 and will increase at the annual general inflation rate of 9%.

(a) Using the most recent population data for Town A, create an appropriate NPV-based model to analyse how MFSA can fund the above project. State any two (2) assumption(s) used by your model

(b) Using your model, examine whether a budget of $7 million is sufficient for the Government to fund the project if the target is to install the PAB device for 65% of all households in Town A. Is it sufficient? Why?

What budget would be required in order to fund 80% of all households in the same town if each household has to co-pay 15% of the device costs each year over 3 years? Explain how you derive your answer.