Subject : FINANICIAL MANAGEMENT

Johnson & Johnson Corporation has plan to diversify their business. One is to open a fast-food restaurant and the other one is an opening of boutique. Both are located in Kuala Lumpur and both projects are forecast to be opened in June 2022. Fast-food restaurant has been given the name as J&J Restaurant and the initial investment is RM150,000. While the boutique has been given name as Jie & Joe ane the cost involved is about RM100,000. The cost of capital is 12%.

As a finance manager you are forecasting both projects on the annual cash flow based on few methods. The cash flow are as follows:

J&J Restaurant Annual Cash Flows:

1^st year RM40,000, 2^nd year increase to RM55,000, 3^rd year increase by RM10,000, the 4^th year is RM70,000 and the 5^th year is RM85,000

Jie &Joe Boutique Annual Cash Flows:

1^st year RM30,000, 2^nd year increase by RM15,000, 3^rd year is RM45,000 and the 4^th year is RM50,000 and the 5^th year is RM70,000

You determine the above annual cash flows according to:

1. Payback period
2. Discounted payback period
3. NPV
4. Profitability Index (PI)

Your requirement as follows:

1. The project should cover at least in Year 3
2. To decide from each of the above methods which are the best project to accept and to reject either they are independent projects or both are mutually exclusive.