Management Accounting. Solve this Ukir Berhad is a furniture manufacturing company. Currently, the managing director isthinking of investing in two mutually exclusive investment projects. Project A requires aninitial investment cost of RM40,000 while Project B requires an initial investment cost ofRM30,000. The revenues and operating cost (which would be incurred at the end of eachyear) for the next four years are estimated to be as follows:PROJECT AVariable costs (RM)Revenues (RM)Fixed costs (RM)Year 113,00018,0007,0009,00012,00012,0001,0002,0003,000Year 2Year 335,00025,000Year 41,000PROJECT BVariable costs (RM)IT TTFixed costs (RM)Revenues (RM)22,000Year 112,00021,0004,0003,000Year 238,0008,0005,000Year 316,0009,0002,000Year 41,000Both projects will have a useful life of four years. It is estimated that Project A and ProjectB would have a salvage value of RM3,000 and RM1,000 respectively at the end of year 4.As funds are limited, only one investment alternative can be chosen.The company's cost of capital is 16% and the relevant discount rates are as follows:Year 1Year 2Year 3Year 4PVIF0.8620.7430.6410.552Required:Calculate the net present value of investment Project A by showing the cash flowcalculation on the investment.а.Calculate the net present value of investment Project B by showing the cash flowcalculation on the investment.b.Advise the managing director on which project to be chosen as a good investmentdecision by stating your reason.С.

Net Present Value = Present Value of Cash Inflow - Initial Investment

Required: а. Calculate the net present value of investment Project A by showing the cash flow calculation on the investment. Calculate the net present value of investment Project B by showing the cash flow calculation on the investment. b. Advise the managing director on which project to be chosen as a good investment decision by stating your reason. с.

Required: а. Calculate the net present value of investment Project A by showing the cash flow calculation on the investment. Calculate the net present value of investment Project B by showing the cash flow calculation on the investment. b. Advise the managing director on which project to be chosen as a good investment decision by stating your reason. с.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 26P

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