QUESTION 3 A business owner has a choice of 2 investment projects. The estimated costs and returns are as follows: Project A (RM) 400,000 Project B (RM) Cost 320,000 Year 1 cash flow (20,000) 25,000 Year 2 cash flow 270,000 190,000 Year 3 cash flow 360,000 315,000 (a) Calculate the NPV for Project A and Project B using a discount factor of 16% as given in the following table. Year 16% discount factor 1 0.862 2 0.743 3 0.641 (10 marks) (b) At a discount factor of 18%, the NPV of Project A is negative RM3,840. Using this information and your answer to part (a), estimate the IRR. (5 marks) (c) For projects A and B above, repair and maintenance costs are expected to average RM15,000 per annum for Project A and RM20,000 for Project B. Use the ARR method of investment appraisal to advise the business owner on which project is the better investment. (10 marks) (Total: 25 marks)