A company is considering two mutually exclusive investments with a discount rate of 10%.
The cash flows of the projects over time follows:
Time Project A Project B
0 - RM300,000 - RM405,000
1 - RM387,000 RM134,000
2 - RM193,000 RM134,000
3 - RM100,000 RM134,000
4 RM600,000 RM134,000
5 RM600,000 RM134,000
6 RM850,000 RM134,000
7 - RM180,000 RM0
A. What is the Net Present Value (NPV) for each project?

B. Since the projects are mutually exclusive, which project would you recommend?
Justify your recommendation.

C. Suppose that the projects are independent projects, which project (s) would you recommend? Justify your recommendation.

D. The company does not want to issue new share capital or debentures to finance this project. Recommend three (3) appropriate financing methods for this project. Provide support for your recommendations.

Answer rating: 100% (QA)

A Project A NPV RM300000 RM387000 11 RM193000 112 RM100000 113 RM600000 114 RM600000 115 RM850000 11... View the full answer