ENGINEERING ECONOMY AND PROJECT MANAGEMENT ASSIGNMENT 4 BENEFIT COST Due to the presence of a river in Pekan Nenas near

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Engineering Economy And Project Management Assignment 4 Benefit Cost Due To The Presence Of A River In Pekan Nenas Near 1 (112.26 KiB) Viewed 21 times

ENGINEERING ECONOMY AND PROJECT MANAGEMENT ASSIGNMENT 4 BENEFIT COST Due to the presence of a river in Pekan Nenas near Pontian, vehicle users must take a winding route to access certain locations. As a result, travel time is increased and fuel costs are increased. So, the Johor government is considering building a bridge across the river. The bridge's initial investment is expected to be RM 4,000,000. The bridge is expected to last 15 years. Annual operation and maintenance costs are estimated to be RM 150,000. The value of the fuel savings resulting from the bridge's construction is RM 600,000 in the first year and increases by RM 50,000 annually afterwards until the bridge's life ends. The discount rate is 12% per year. (a) Draw and label a complete cash flow diagram of the construction project. (2 marks) (b) Determine whether the project is justified based on the Benefit Cost ratio analysis. (10 marks) (c) Once the project was publicized, the villagers oppose the proposal due to the reduction of available land for commercial development. Thus, the consultant engineer identified new viable site for a new bridge across the river. The initial investment as well as annual operation and maintenance costs, stay unchanged. However, the value of the fuel savings resulting from the bridge's construction is 500,000 per year and the bridge is expected to last forever. Redo the B/C analysis to determine if the economic decision is still the same. (8 marks)