LEXUS BERHAD

Lexus Berhad is considering two mutually exclusive projects, A and B.

Project A costs RM80,000, with additional working capital of RM15,000. The project is expected to generate RM65,000 in year one and RM75,000 in year two, and final disbursement in year 3 is 30% of the project cost.

Project B costs RM120,000, inclusive of purchase of fixed asset of RM20,000. The cash flows are RM64,000 in year one, RM67,000 in year two, RM56,000 in year three, and RM45,000 in year four. At the termination of the project, 50% of the fixed asset value can be recovered.

The firm's required rate of return and reinvestment rate for these projects is 7.25%.

Note: reinvestment value refers to future value

16. The NPV for project B is RM

17. The IRR of project B is __%

18. he PI of project B is ______

19. Total reinvestment of project B's cash flow is RM_________

20. The MIRR of project B is _________%

21. Project A should be accepted based on NPV.

22. Based on its' IRR, project B should be accepted and project A is to be rejected.