Answered step by step
Verified Expert Solution
Question
1 Approved Answer
After considering and analysing all information regarding a firm's cost of capital, now it is time for evaluating and selecting investments that are worth more
After considering and analysing all information regarding a firm's cost of capital, now it is time for evaluating and selecting investments that are worth more than they cost and create wealth for investors. A firm needs procedure to analyse and select the best investment alternatives. There are a few methods that are available which may help a firm to decide which is the best investment to choose. Your firm is attempting to select the best of three mutually exclusive projects. The initial investment and subsequent cash inflows associated with these projects are shown in the following table: Cash flows Project A -RM60,000 Project B -RM100,000 Cash inflows (cf, t = 1-5) RM20,000 RM31,500 Project C -RM110,000 RM32,500 Initial investment (CF) You are required to do the followings: 1. Calculate the payback period for each project. 2. Calculate the net present value (NPV) of each project, assuming that your firm has a cost of capital equal to 13%. 3. Calculate the internal rate of return (IRR) for each project
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started