Tutorial Highway Evaluation

Sudesh Nair Baskara

Tutorial 1

Choose the best project using NPW, EUAW, BCR and ROR method

Solution Tutorial 1
NPW1 = -165000 + 53000 x (6.71)
= 190 630
NPW2 = -160000 + 47000 x (6.71)
= 155 370
EUAW1 = -165000 (0.149) + 53000
= 28415

EUAW2 = -160000 (0.149) + 47000

= 23160

Solution Tutorial 1
For BCR, we choose the lowest Initial Cost first
BCR2 = 315370 / 160000
= 1.971

BCR1 = (355630 - 315370) / (165000 - 160000)

= 8.052

If both the ROR are above the interest rate, then the alternative
with the highest cost project is chosen.
ROR1 = -165000 + 53000 x (X)
X= 3.113
i = 0.29 = 29%
ROR2 = -160000 + 47000 x (X)
X= 3.404
i = 0.26 = 26%

Tutorial 2

Solution Tutorial 2
NPWX = -1500000 + 1300000 x (3.993)
= 3690900
NPWY = -1400000 + 1345000 x (3.993)
= 3970585
NPWZ = -1300000 + 1160000 x (3.993)
= 3331880

EUAWX = -1500000 (0.250) + 1300000

= 925000
EUAWY = -1400000 (0.250) + 1345000
= 995000
EUAWZ = -1300000 (0.250) + 1160000
= 835000

Solution Tutorial 2
BCRZ = 4631880 / 1300000
= 3.563

BCRY = (5370585 - 4631880) / (1400000 - 1300000)

= 7.387
BCRX = (5190900 - 5370585) / (1500000 - 1400000)
= -1.797
RORX = -1500000 + 1300000 x (X)
X = 1.154
i = 0.82 = 82%
RORY = -1400000 + 1345000 x (X)
X = 1.041
i = 0.92 = 92%
RORZ = -1300000 + 1160000 x (X)
X = 1.121
i = 0.85 = 85%