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HELP

Forums › ACCA Forums › General ACCA Forums › HELP

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Kim Smith.
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  • March 16, 2023 at 4:53 pm #681423
    mzhareen
    Participant
    • Topics: 2
    • Replies: 0
    • ☆

    A construction company has two alternative schemes to improve their property portfolio. Scheme ‘A’ involves a complete modernisation of buildings which will cost £2,500,000 now. Annual operation and maintenance charges will amount to £125,000 per year.

    Scheme ‘B’ would involve investing £1,000,000 now and the remainder of the work carried out in 5 years’ time at a cost of £1,700,000. In this alternative scenario, annual operating and maintenance charges will be £150,000 per year for the first 5 years and

    £125,000 per year thereafter.

    For this purpose, you are required to calculate the Net Present Value (NPV) and the Equivalent Annual Cost (EAC) for both schemes and advise the client on the most appropriate option. Assume an annual interest rate of 7% and an assert life of 30 years for both schemes. Your answer needs to clearly illustrate the calculations and a brief explanation as to which option should be prioritised and why.

    March 16, 2023 at 6:19 pm #681427
    Kim Smith
    Keymaster
    • Topics: 134
    • Replies: 8308
    • ☆☆☆☆☆

    Welcome to our forums!

    To get the most out of our service we recommend that you observe the posting rules https://opentuition.com/forums/forum-rules – “help” is not a suitable subject line.

    Also, you need to select the most appropriate forum for technical queries – this forum is for “Everything about ACCA which is not exam specific”.

    Also please note that we do not offer a service to answer homework/course assignments.

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