Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As an Investment Manager, you are required to do some analysis on two mutually exclusive products in the table below. The initial investment for both

As an Investment Manager, you are required to do some analysis on two mutually exclusive products in the table below. The initial investment for both projects is RM250,000. Below are the financial data involved in the projects:

Year Type 1 Type 2 Cash flows (RM) 1 (50,000) 55,000 2 75,000 55,000 3 70,000 55,000 4 75,000 55,000 5 98,000 55,000 6 105,000 55,000

i) Based on the above information, determine the number of years required for both projects to recover its initial costs.

(3 marks) ii) Assuming the cost of capital for the project is 9 percent, calculate the Net Present Value (NPV) and Profitability Index for each project.

(7 marks)

iii) Justify which project should be selected.

(2 marks)

b) Briefly explain the relationship between NPV and IRR.

(3 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Stock Market Trading For Beginners

Authors: Irvin Tarr

1st Edition

1491885327, 978-1491885321

More Books

Students also viewed these Finance questions