-4- Question 3 A company is considering 2 alternative investment proposals. The first proposal calls for total replacement of the company's machines and equipment, while the second proposal involves repairing some parts of the existing machines and equipment. The company will only choose to implement one of the proposed projects for this year. The projected cash flows associated with each project are as per table below. The discount rate used by the company is 15%. YEAR TOTAL REPLACEMENT (RM’000) REPAIR (RM'000) -9,000 -2,400 1 3,000 2,000 3,000 800 3,000 200 4 3,000 200 3,000 200 2. 3.
-4- Question 3 A company is considering 2 alternative investment proposals. The first proposal calls for total replacement of the company's machines and equipment, while the second proposal involves repairing some parts of the existing machines and equipment. The company will only choose to implement one of the proposed projects for this year. The projected cash flows associated with each project are as per table below. The discount rate used by the company is 15%. YEAR TOTAL REPLACEMENT (RM’000) REPAIR (RM'000) -9,000 -2,400 1 3,000 2,000 3,000 800 3,000 200 4 3,000 200 3,000 200 2. 3.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
(a) Calculate the payback period for each project.
(b) Calculate the net present value (NPV) for each project.
(c) Calculate the profitability index of each project.
(d) Explain to the company which project should be implemented. Support your
answer.
Transcribed Image Text:-4-
Question 3
A company is considering 2 alternative investment proposals. The first proposal calls for total
replacement of the company's machines and equipment, while the second proposal involves
repairing some parts of the existing machines and equipment. The company will only choose to
implement one of the proposed projects for this year. The projected cash flows associated with
each project are as per table below. The discount rate used by the company is 15%.
YEAR
ТОTAL REPLAСЕMENT (RM'000)
REPAIR (RM’000)
-9,000
-2,400
1
3,000
2,000
3,000
800
3,000
200
3,000
200
5
3,000
200
2.
3.
4.
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