QUESTION 2 Your firm is trying to invest in a Project A for planning horizon of 5 years. The initial investment and initial revenue are RM300, 000 and RM10, 000 respectively. The cost for first year including renovation of building (RM5, 000), IT (RM5, 500) and maintenance (RM9, 000). The annual cost of operation is RM20, 000 for second year while remaining are RM10, 000. The company predicts that the project will generate a stream of earning RM100, 000, RM120, 000, RM130, 000 and RM150, 000 for first 4 years respectively. While the expected revenue of year 5 comes from 3rd party payment (RM70, 000), technology transfer (RM70, 000) and new systems (RM60,000). Develop a gross cash flow and calculate the cash flow after tax of 30%. Estimate the internal rate of return (IRR) after If the Project B has IRR of 35%, decide the best investment and state your
QUESTION 2 Your firm is trying to invest in a Project A for planning horizon of 5 years. The initial investment and initial revenue are RM300, 000 and RM10, 000 respectively. The cost for first year including renovation of building (RM5, 000), IT (RM5, 500) and maintenance (RM9, 000). The annual cost of operation is RM20, 000 for second year while remaining are RM10, 000. The company predicts that the project will generate a stream of earning RM100, 000, RM120, 000, RM130, 000 and RM150, 000 for first 4 years respectively. While the expected revenue of year 5 comes from 3rd party payment (RM70, 000), technology transfer (RM70, 000) and new systems (RM60,000). Develop a gross cash flow and calculate the cash flow after tax of 30%. Estimate the internal rate of return (IRR) after If the Project B has IRR of 35%, decide the best investment and state your
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 12PROB
Related questions
Question
QUESTION 2
Your firm is trying to invest in a Project A for planning horizon of 5 years. The initial investment and initial revenue are RM300, 000 and RM10, 000 respectively. The cost for first year including renovation of building (RM5, 000), IT (RM5, 500) and maintenance (RM9, 000). The annual cost of operation is RM20, 000 for second year while remaining are RM10, 000. The company predicts that the project will generate a stream of earning RM100, 000, RM120, 000, RM130, 000 and RM150, 000 for first 4 years respectively. While the expected revenue of year 5 comes from 3rd party payment (RM70, 000), technology transfer (RM70, 000) and new systems (RM60,000).
- Develop a gross cash flow and calculate the cash flow after tax of 30%.
- Estimate the
internal rate of return (IRR) after
- If the Project B has IRR of 35%, decide the best investment and state your
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning