Jumpa EV Pte Ltd wants to embark on a vehicle equipment project. For this project, it needs to invest in some initial research and development but will reap handsome returns in the next three years. The company had shortlisted two plans. The cash flows predicted for the two plans are as follows: 

YearPlan A      Plan B

0 -900,000 -750,000

1  320,000 490,000

2 800,000 790,000

3 950,000 850,000

A) Using the Net Present Value approach, with an interest rate of 5.5% p.a., which plan should the company choose? Explain your decision.

B) Using the Payback Method, with an interest rate of 5.5% p.a., which plan should the company choose? Explain your decision.

Answer rating: 100% (QA)

ANSWER Year Plan A Plan B 0 900000 750000 1 320000 490000 2 800000 790000 3 950000 850000 To calcula... View the full answer