QUESTION 1 (CLO 2)

b) Aziz has opportunity to invest in project A and B. The initial investment for both project are RM8,500 and RM7,500 respectively. The required rate of return for this investment are 12%. Project A is expected to reap a yearly income of RM3,000 maintain for first three years, RM5,000 and RM6,000 for the year four and five. The expected yearly income for project B is RM2,000, RM2,000, RM2,000, RM3,000 and RM4,000. Compute the discounted payback period both project A and B. (10 marks)

QUESTION 2 (CLO 3)

a) Using the projects range of income flows and initial investments mentioned in Question 1(b) above, and using the Present Value Annuity Table to find the estimated Internal Rate of Return (IRR) (as a basis to find the actual IRR for the chosen project). Use a financial table. (20 marks)

b) The H&M Company is considering purchasing a new machine that would increase the speed of production. The net cost of this machine is RM100,000. The scrap value of investment is RM0. The cash flow for the 5 years is RM25,000, RM30,000, RM25,000, RM20,000 and RM5,000. Based on information given, compute the accounting rate of return (ARR) for H&M company. (5 marks)