Question 5 Fatima is the project manager for Construction Company. Given below is the information tender for two projects. If Fatima has Standard Operating Procedure(SOP) cost of capital for every project is 10% and the priority to select the mutually exclusive project is by payback period with consideration of time value of money.

Year A B 0 (100,000) (100,000) 1 60,000 50,000 2 40,000 30,000 3 12,000 30,000 4 2,000 20,000 5 16,000 -

Please help Fatima to

a) Determine the payback period for each project

b) Determine the net present value(NPV) and Profitability Index (PI)

c) Compute the discounted payback period.

d) Which project should he invest if the projects are independent? Explain why.

e) Which project should he invest if the projects are mutually exclusive? Explain why. (20 Marks) Year A B 0 (100,000) (100,000) 1 60,000 50,000 2 40,000 30,000 3 12,000 30,000 4 2,000 20,000 5 16,000 -