B & E Sdn Bhd is evaluating three (3) projects for its expansion. However, due to the financial constraint, the company can only invest in one (1) project. Detail information relating to the projects is given below:

(i) Project H3

• Initial investment is RM420,000
• Useful life is 7 years
• Salvage value at the end of seven years is zero
• Additional information is as follows:

	Year 1 (RM)	Year 2 (RM)	Year 3 (RM)	Year 4 (RM)	Year 5 (RM)	Year 6 (RM)	Year 7 (RM)
After tax cash inflow	315,000	351,000	330,000	349,000	360,000	395,000	407,000
After tax cash outflow	195,000	221,000	190,000	199,000	200,000	225,000	227,000
Depreciation	60,000	60,000	60,000	60,000	60,000	60,000	60,000

(ii) Project K4

• Initial investment is RM600,000
• Useful life is 6 years
• Salvage value at the end of six years is RM60,000
• Additional information is as follows:

	Year 1 (RM)	Year 2 (RM)	Year 3 (RM)	Year 4 (RM)	Year 5 (RM)	Year 6 (RM)
Net after tax cash flow	120,000	120,000	120,000	120,000	120,000	120,000
Depreciation	90,000	90,000	90,000	90,000	90,000	90,000

(iii) Project N5

• Initial investment is RM570,000
• Useful life is 6 years
• Salvage value at the end of six years is zero
• Additional information is as follows:

	Year 1 (RM)	Year 2 (RM)	Year 3 (RM)	Year 4 (RM)	Year 5 (RM)	Year 6 (RM)
Net after tax cash flow	105,000	125,000	160,000	180,000	245,000	355,000
Depreciation	95,000	95,000	95,000	95,000	95,000	95,000

Note:

The company's required rate of return for each project is 22%.

Present Value of $1

Periods	5%	20%	22%	28%
1	0.952	0.833	0.820	0.781
2	0.907	0.694	0.672	0.610
3	0.864	0.579	0.551	0.477
4	0.823	0.482	0.451	0.373
5	0.784	0.402	0.370	0.291
6	0.746	0.335	0.303	0.227
7	0.711	0.279	0.249	0.178

Present Value of Annuity of $1

Periods	5%	20%	22%	28%
1	0.952	0.833	0.820	0.781
2	1.859	1.528	1.492	1.392
3	2.723	2.106	2.042	1.868
4	3.546	2.589	2.494	2.241
5	4.329	2.991	2.864	2.532
6	5.076	3.326	3.167	2.759
7	5.786	3.605	3.416	2.937

Required:

(a) Compute the payback period for each project.

(b) Compute the accounting rate of return (ARR) for each project.

(c) Compute the net present value (NPV) for each project.

(d) Compute the internal rate of return (IRR) for each project.

(e) Compute the profitability index (PI) for each project.

(f) Determine which project the company should choose? Why?