The UMCCED Technology is considering two genetic research projects. The required rate of return on these projects is 11%. The two projects provide the following set of after-tax net cash flows. Project AKU Project ENGKAU Initial outlay -RM50,000 -RM50,000 Inflow year 1 RM10,000 RM16,000 Inflow year 2 RM18,000 RM16,000 Inflow year 3 RM15,000 RM16,000 Inflow year 4 RM16,000 RM16,000 Inflow year 5 RM13,000 RM16,000 (a) Determine the payback period for each project. If the institute imposes a 3.5-year maximum acceptable payback period, which of these projects should be accepted? (b) Calculate the net present value (NPV) for each project. (c)Calculate profitability index (PI) for each project.
The UMCCED Technology is considering two genetic research projects. The required
|
|
Project AKU |
Project ENGKAU |
|
Initial outlay |
-RM50,000 |
-RM50,000 |
|
Inflow year 1 |
RM10,000 |
RM16,000 |
|
Inflow year 2 |
RM18,000 |
RM16,000 |
|
Inflow year 3 |
RM15,000 |
RM16,000 |
|
Inflow year 4 |
RM16,000 |
RM16,000 |
|
Inflow year 5 |
RM13,000 |
RM16,000 |
(a) Determine the payback period for each project. If the institute imposes a 3.5-year maximum acceptable payback period, which of these projects should be accepted? (b) Calculate the
(c)Calculate profitability index (PI) for each project.
(d)Calculate the
(e)Based on the IRR given and your answers in part (b) and (c) above, explain briefly which project should be accepted,
- If they are independent?
- If they are mutually exclusive?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
