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Question 4 a. Briefly explain two major limitations of the payback period in the context of capital budgeting and how they affect its usefulness. (2)
Question 4 a. Briefly explain two major limitations of the payback period in the context of capital budgeting and how they affect its usefulness. (2) b. In capital budgeting, how the cost of capital is used in project evaluation? Briefly explain your answer. d. Neil Ltd. has two projects under consideration. The cash flows for each of them are shown in the following table. i. Calculate each project's discounted payback period. Which project is preferred according to this method if the management sets the cut-off payback period as 4.5 years? ii. Calculate each project's net present value (NPV). Which project is preferred according to this method? Why? iii. Recommend the best project to choose based on your calculations under different capital budgeting techniques above if the projects are mutually exclusive and justify your choice
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