As the Chief Financial Officer (CFO) of a public listed company (property sector) in Bursa Malaysia. You are considering investing in a new project in Bukit Bintang, Kuala Lumpur. 

The initial investment is RM6,500 million with a required rate of return is 8%. After consulting with the project team, the project is expected to generate operating cash flow: 

Year 1: RM2,000 million,

 Year 2: RM4,000 million and 

Year 3: RM3,000 million.

 Questions

a. How much is the payback period? Should the project be accepted or rejected? Critically evaluate your answer and provide justification on it.

b. How much is the discounted payback period? Should the project be accepted or rejected? 

c. How much is the net present value (NPV)? Should the project be accepted or rejected? 

d. How much is the internal rate of return (IRR)? Should the project be accepted or rejected? 

e. How much is the modified internal rate of return (MIRR)? Should the project be accepted or rejected?

Answer rating: 100% (QA)

SOLUTION a To calculate the payback period we need to determine the time it takes for the projects operating cash flows to recover the initial investment The cumulative cash flow for Year 1 is RM2000 ... View the full answer