Northland Past paper

Question 5: Northland’s
Part (b)
Answer is 36729000

There are two ways to calculate but I am unable to figure which is correct. If both are correct so why is preferred. I know it is an old question but practising it.

Method one:
Repair after contingency= 2000×1.1= 2200
Price after inflation = 15000×1.05= 15750
Expected value of increase in price = (0.7×0%)+(0.1×10%)+(0.2×25%) = 6%
Cost per meter (after increase by expected value) = 15750×1.06= 16695
Total cost= 16695×2200= 36792000.

Method 2:
Repair after contingency= 2000×1.1= 2200
Expected value of increase in price = (0.7×0%)+(0.1×10%)+(0.2×25%) = 6%
Repairs per meter (after expected value increase) = 15000+900= 15900
Total repair cost before inflation= 15900×2200= 34980000
Total repair cost after 5% inflation = 34980000×1.05= 36729000.