QUESTION 4Determine FIVE (5) reasons why payback period method cannot be recommendedas the main method used by a company to assess potential investment projects.а.In an effort to expand its activities in the local market, Paradigm Engineering Sdn.Bhd. is considering two mutually exclusive projects, one with a four-year life and theother with a six-year life. Both projects require an initial outlay of RM140,000. Theannual after-tax cash flows of the projects are as follows:b.YearProject Rain (RM)Project Kain (RM)50,00050,00050,00050,00040,00040,00040,00040,00040,00040,00012346.Assume that the policy of the company is to demand a required rate of return of 10%on any investment in the project.Required:Compute the following capital budgeting measures for both projects:i.Payback Period.ii.Net Present Value.iii.Internal Rate of Return.iv.Based on the information derived from the above calculations (i, ii and ii),evaluate which of the two projects the company should select. Justify therationale for your selection.

The question here relates to time value of money. We will use the principles of capital budgeting…

Compute the following capital budgeting measures for both projects: i. Payback Period. ii. Net Present Value. iii. Internal Rate of Return. iv. Based on the information derived from the above calculations (i, ii and ii), evaluate which of the two projects the company should select. Justify the rationale for your selection.

Compute the following capital budgeting measures for both projects: i. Payback Period. ii. Net Present Value. iii. Internal Rate of Return. iv. Based on the information derived from the above calculations (i, ii and ii), evaluate which of the two projects the company should select. Justify the rationale for your selection.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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