ssume a RM300,000 investment and the following cash flows for two products: Product X RM 70,000 80,000 90,000 Year Product Y RM 1 80,000 95,000 105,000 125,000 2 3 4 95,000 ost of capital is 12%

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Chapter9: Capital Budgeting Techniques
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TUTORIAL : CAPITAL BUDGETING (PAYBACK PERIOD, NPV, IRR)
QUESTION - 1
Assume a RM300,000 investment and the following cash flows for two products:
Year
Product X
Product Y
RM
80,000
95,000
105,000
125,000
RM
70,000
80,000
90,000
1
3
4
95,000
Cost of capital is 12%
Required:
For each possible project you are required to calculate:
(a) Accounting rate of return (ARR)
(b) Payback Period PP)
(c) Net Present Value (NPV)
(d) Internal Rate of Return (IRR)
(e) Suggest which product may choose as per IRR.
Transcribed Image Text:TUTORIAL : CAPITAL BUDGETING (PAYBACK PERIOD, NPV, IRR) QUESTION - 1 Assume a RM300,000 investment and the following cash flows for two products: Year Product X Product Y RM 80,000 95,000 105,000 125,000 RM 70,000 80,000 90,000 1 3 4 95,000 Cost of capital is 12% Required: For each possible project you are required to calculate: (a) Accounting rate of return (ARR) (b) Payback Period PP) (c) Net Present Value (NPV) (d) Internal Rate of Return (IRR) (e) Suggest which product may choose as per IRR.
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