Following are the data for two projects taken from XYZ Company Project A (RM) Project B...

 

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Following are the data for two projects taken from XYZ Company Project A (RM) Project B (RM) 98,000 90,000 i. ii. iii. iv. Initial Investment Year 1 2 3 4 5 Operating Cash Inflow 47,000 44,000 30,000 34,000 34,000 34,000 34,000 34,000 30,000 30,000 Calculate and determine which project is better for each of the following capital budgeting techniques: Accounting Rate of Return (Assume salvage value = 0) Payback Period Net Present Value (Use cost of capital = 10%) Profitability Index (Use the same cost of capital in iii. above) Following are the data for two projects taken from XYZ Company Project A (RM) Project B (RM) 98,000 90,000 i. ii. iii. iv. Initial Investment Year 1 2 3 4 5 Operating Cash Inflow 47,000 44,000 30,000 34,000 34,000 34,000 34,000 34,000 30,000 30,000 Calculate and determine which project is better for each of the following capital budgeting techniques: Accounting Rate of Return (Assume salvage value = 0) Payback Period Net Present Value (Use cost of capital = 10%) Profitability Index (Use the same cost of capital in iii. above)

Answer rating: 100% (QA)

SOLUTION i Accounting Rate of Return ARR ARR is calculated by dividing the average annual income by ... View the full answer