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Alpha Corporation is considering an investment project that requires an initial outlay of RM1,000,000. The project is expected to provide net cash inflows of RM100,000
Alpha Corporation is considering an investment project that requires an initial outlay of RM1,000,000. The project is expected to provide net cash inflows of RM100,000 in year 1 , RM400,000 in year 2, RM500,000 in year 3, RM300,000 in year 4 and RM100,000 in year 5. (a) Compute the net present value of the project if the firm estimates its cost of capital to be \10. (b)Compute the profitability index of the project. (c) Why is net present value considered to be a superior method of evaluating the cash flows from a project? (d)Although it is conceptually unsound, the payback period is very popular in business as a criterion for assigning priorities to investment projects. Why is it unsound and why is it popular
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