Subject: FINANCE MANAGEMENT

(a) Manisha is senior manager of Darky Corporation and has been authorized to spend up to RM300,000 for any profitable projects investment. There are two projects that can be considered with the following characteristics:

Project A - Initial investment of RM280,000. Cash flow of RM190,000 at year 1 and RM170,000 at year 2. This is a plant expansion project where the required rate of return is 10 percent.

Project B - Initial investment of RM230,000. Cash flow of RM0 at year 1 and RM190,000 at year 2. This is a new product development project where the required rate of return is 15 percent.

Based on the information above, calculate the Net Present Value (NPV) for two projects and recommend the best project should be taken.