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Bunga Kertas Berhad (BKB) is considering including one of three systems in this year's capital budget. The cash outflows for each system are RM100,000. The
Bunga Kertas Berhad (BKB) is considering including one of three systems in this year's capital budget. The cash outflows for each system are RM100,000. The after-tax cash inflows associated with each system are shown in the following table: From the information given, you are required to answer the following questions. a. Compute each system's Payback Period. (3 Marks) b. Calculate each system's Net Present Value (NPV) if the cost of capital is 5%. (6 Marks) c. Calculate each system's NPV if the cost of capital is 15%. (3 Marks) d. Using your calculation in part (b) and (c), compute each system's Internal Rate of Returns (IRR). (6 Marks) e. From your findings in part (a), (b) and (d), indicate which system you would recommend to BKB. Explain your answer. (7 Marks)
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