The financial analyst at Carlo Products is evaluating two new capital budgeting proposals. Below is all about two proposed projects, both with 5 years of expected lives and identical initial outlays of RM 8,000 for project A and RM20,000 for project B. The project has been established at 15 per cent. The expected free cash flows from each project are as follows: Project A Project B Initial outlay (8,000) (20,000) Year 1 2,000 5,000 Year 2 4,000 4,000 Year 3 1,000 3,000 Year 4 3,000 6,000 Year 5 2,000 7,000 In evaluating these projects, please respond to the following questions: Calculate all the methods below and advise Carlo Products. a) Payback Period b) Net present Value c) Profitability index.
The financial analyst at Carlo Products is evaluating two new capital budgeting proposals. Below is all about two proposed projects, both with 5 years of expected lives and identical initial outlays of RM 8,000 for project A and RM20,000 for project B. The project has been established at 15 per cent. The expected free cash flows from each project are as follows: Project A Project B Initial outlay (8,000) (20,000) Year 1 2,000 5,000 Year 2 4,000 4,000 Year 3 1,000 3,000 Year 4 3,000 6,000 Year 5 2,000 7,000 In evaluating these projects, please respond to the following questions: Calculate all the methods below and advise Carlo Products. a) Payback Period b) Net present Value c) Profitability index.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...
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The financial analyst at Carlo Products is evaluating two new capital budgeting proposals. Below is all about two proposed projects, both with 5 years of expected lives and identical initial outlays of RM 8,000 for project A and RM20,000 for project B. The project has been established at 15 per cent. The expected
| Project A | Project B | |
| Initial outlay | (8,000) | (20,000) |
| Year 1 | 2,000 | 5,000 |
| Year 2 | 4,000 | 4,000 |
| Year 3 | 1,000 | 3,000 |
| Year 4 | 3,000 | 6,000 |
| Year 5 | 2,000 | 7,000 |
In evaluating these projects, please respond to the following questions:
Calculate all the methods below and advise Carlo Products.
a) Payback Period
b)
c) Profitability index.
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