(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%