Question 4

Carson Sdn Bhd is considering which of two mutually exclusive projects it should undertake. Details of the projects cash flows are given below:

Year Project A (RM) Project B (RM)

0 (20,000) (20,000)

1 4,600 11,200

2 6,200 8,600

3 8,000 6,600

4 10,600 0

The companys cost of capital is 12%.

Required:

1. Calculate the projects on the basis of:

1. Payback period

(4 marks)

2. Net present value

(6 marks)

3. Internal rate of return

(10 marks)

2. Dicuss the any TWO (2) advantages and disadvantages of using payback period

(5 marks)

(Total: 25 marks)