Question
Levine Berhad Levine Berhad is considering two mutually exclusive projects, A and B. Project A costs RM180,000, with additional working capital of RM15,000. The project
Levine Berhad Levine Berhad is considering two mutually exclusive projects, A and B. Project A costs RM180,000, with additional working capital of RM15,000. The project is expected to generate RM150,000 in year one and RM75,000 in year two, and final disbursement in year 3 is 30% of the project cost. The working capital will also be recovered at Year 3. Assume the cost of the project of 5.5%. Project B's initial outlay is RM200,000 including purchase of fixed asset of RM50,000. The cash flows are RM80,000 in year one, RM100,000 in year two, RM56,000 in year three, and RM45,000 in year four. At the termination of the project, 50% of the fixed asset value can be recovered. Assume cost of project of 5.3%. Note: reinvestment value refers to future value.
1. Project A's Initial Outlay is RM______.
2. Project A's Terminal Value is RM__.
3. Project A's PV of the OCF in Year 1 is RM______.
4. Project A's PV of the OCF in Year 2 is RM______.
5. Project A's PV of the OCF in Year 3 is RM______.
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