Consider the following two mutually exclusive projects: Year Cash flow project A (RM) -54,000 12,700 23,200 27,600 46,500 0 1 2 3 4 Cash flow Project B (RM) -23,000 11,600 11,200 12,500 6,000 Whichever project you choose, if you require a 14 percent return on your investment i) Compute the payback period for both project ii) Compute the Net Present Value (NPV) for both projects. iii) Which project do you prefer and which? Fully explain the result of your analysis
Consider the following two mutually exclusive projects: Year Cash flow project A (RM) -54,000 12,700 23,200 27,600 46,500 0 1 2 3 4 Cash flow Project B (RM) -23,000 11,600 11,200 12,500 6,000 Whichever project you choose, if you require a 14 percent return on your investment i) Compute the payback period for both project ii) Compute the Net Present Value (NPV) for both projects. iii) Which project do you prefer and which? Fully explain the result of your analysis
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 15P
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