Question
RAPID ZOOMER A WELL-KNOWN HI-SPEED TRAIN COMPANY IS OFFERED TO INVEST IN NEW LRT LINE FROM TANJUNG KARANG TO SEKINCHAN. THE INVESTMENT REQUIRED RM200 MILLION
RAPID ZOOMER A WELL-KNOWN HI-SPEED TRAIN COMPANY IS OFFERED TO INVEST IN NEW LRT LINE FROM TANJUNG KARANG TO SEKINCHAN. THE INVESTMENT REQUIRED RM200 MILLION AS A CAPITAL AND THE COMPANY ARE EXPECTED TO EARN A RETURN OF RM10 MILLION PER YEAR FOR 30YEARS. THE OPERATING AND MAINTENANCE COST ARE RM2.5 MILLION PER YEAR.AT THE END OF THE CONTRACT , THE COMPANY IS REQUIRED TO PROVIDE CHARTER SYSTEM FOR COMMUTING PASSENGERS TO SUBURD AREA WHICH WILL REQUIRE A COST OF RM15 MILLION. DRAW CASH FLOW DIAGRAM FOR THIS PROJECT. IF THE INTEREST RATE IS 7.0% CALCULATE THE INTERNAL RATE OF RETURN (IRR) AND EVALUATE WHETHER THE COMPANY SHOULD ACCEPT OR REJECT THE OFFER.
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