Ghazali Ventures Sdn Bhd has the following mutually exclusive projects.

Year Project A (RM) Project B (RM)

0 (1,500,000) (2,000,000)

1 380,000 120,500

2 490,000 1,600,000

3 470,000 450,000

4 530,000 200,000

1. Suppose Ghazali Ventures Sdn Bhd payback period (PP) cut-off is two years. Compare these two projects.

2. Suppose Ghazali Ventures Sdn Bhd uses the Net Present Value (NPV) rule to rank these two projects. Calculate the NPV and choose which project should be chosen if the appropriate discount rate is 10 percent.

3. Based on the answer in (a) and (b), identify which project should be finally chosen and explain your answer with the support of payback period (PP) and Net Present Value (NPV).