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Warni Warna Berhad (WWB) is trying to invest in three mutually exclusive flower design projects. All projects have an initial cash outflow of RM5,000.

 

Warni Warna Berhad (WWB) is trying to invest in three mutually exclusive flower design projects. All projects have an initial cash outflow of RM5,000. Given below are the cash. inflows for each project: Year 1 2 3 Project Merah 3,000 3,000 3,000 RM'000 Project Kuning 1,000 3,000 5,000 Project Hijau 3,000 4,000 2,000 From the information given, you are required to answer the following questions: a. If the company applies the Payback Period decision rule, which project should WWB choose? b. If the required rate of return is 15% and the company applies the Net Present Value decision rule, which project should WWB choose? c. If the company applies the Profitability Index decision rule, which project should WWB choose? d. Based on your answers in part (a) to (c), which project should WWB finally choose to invest? Explain your answer.

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