[2.5]

Normal No Spac... Heading Heading 2 1 Title 1 Subtitle Subtle Em Font Paragraph Styles O No 2. (9 Marks) a) What is the Capital budgeting? Why capital budgeting techniques are used for the evaluation of the investment projects please comment. [2] b) Determine the PBP for a project which requires a cash outlay of S 12000 and generate cash inflows of $ 2000, $4000, $ 4000 and S 5000 in the 1st, 2nd, 3rd and 4th year respectively. [2] c) A company XYZ has 12% WACC and is seeing two mutually exclusive investments with the following cash flows: o 1 2 3 4 5 6 7 Project A Project B $300 $405 $387 5134 $193 $134 S100 $134 S600 $134 $600 $134 $850 $134 $180 SO 1. 11. Which project should be accepted based on NPV? [2.5] Which project should be accepted based on MIRR? (Hint: Consider Period 7 as the end of Project B's life.) [2.5]