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Gagah Perkasa Berhad is considering two mutually exclusive projects with depreciable lives of three and six years. The after-tax cash flow for projects A and

  1. Gagah Perkasa Berhad is considering two mutually exclusive projects with depreciable lives of three and six years. The after-tax cash flow for projects A and B are listed below.

Year

Project A

Project B

0

(100,000)

(100,000)

1

51,250

33,126

2

51,250

33,126

3

51,250

33,126

4

33,126

5

33,126

6

33,126

The required rate of return on these projects is 15 percent.

  1. Using the net present value (NPV) technique, determine which project should be accepted.

(8 marks)

  1. State your reason.

(1 mark

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