Black-Power Generator is planning to construct a power station which has 50 generators to

supply electricity at any point of time. The initial investment cost for the Power station is

RM2,500,000. It is expected to generate revenue RM14,000 per generator in year 1 and 10%

increase for every year from year 2 to 6. The operating cost per generator is RM1,500 and

expected to increase by 10% every year from year 2 to 6. At year 6 it can cease the operation

by selling the entire business for RM42,000. The cost of capital is expected to be about 12%.

Advice whether the project is acceptable or rejected by using the below methods.

A. Accounting Rate of Return (AROR)

B. Payback Period Technique (PBP)

C. Discounted Payback Period (DPBP)

D. Net Present Value Technique (NPV)

E. Profitability Index (PI)

What is the importance of the Technique used for analysis on Capital budgeting cost for a

project?