- 15 Marks
PSAF – Nov 2014 – L2 – Q7 – Public Sector Reforms
Advising on investment projects based on expected returns and understanding cost-benefit analysis features in public project appraisal.
Question
a. Mr. Make-No-Mistake has N200,000 which he decides to invest if he can secure an assurance that the investment will earn at least 10% p.a. He is considering three projects:
- Project A: Will earn N218,000 at the end of the 1st year.
- Project B: Will earn N250,000 at the end of the 2nd year.
- Project C: Will earn N140,000 at the end of 1st year and another N100,000 at the end of 2nd year.
If none of the projects is undertaken, Mr. Make-No-Mistake will invest his N200,000 in something else that will earn him 10% p.a.
You are required to assess and advise Mr. Make-No-Mistake on which of the projects he should undertake. (12 Marks)
b. Identify THREE main features of Cost-Benefit Analysis in public project appraisal. (3 Marks)
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