Megah Berhad is the leading infrastructure developers in the country. Being a nation building corporation, Megah Berhad has been invited by the Kuala Selangor District Council to develop a 39.8 hectors new housing project in Puncak Alam. The total initial investment stands at RM300,000. The total funding will be sourced by the Megah Berhad through a private funding organized by CIMB Bank Berhad. 

The construction is expected to cause an additional funding (tips: cash outflow) of RM40,000 in the first year and RM20,000 in the second year. The cash inflow of RM250,000 at the end of year 3, RM225,000 at the end of year 4, RM210,000 at the end of year 5. Year 6 will be RM180,000. Lastly, RM100,000 in the final year. 

The cost of funding for the housing project in Puncak Alam stands at 9 percent of interest annually. Corporate tax stands at 30%. Ignore depreciation. Megah Berhad's investment committees has set an investment policy of payback period not exceeding 5.5 years. 

Required: 

a. Compute payback period for the housing project in Puncak Alam 

b. Compute the net present value (NPV) and internal rate of return (IRR) for the new exclusive township in Puncak Alam. 

c. Compute the profitability index for the housing project in Puncak Alam. 

d. Provide evaluation on the viability of Housing project in Puncak Alam to Megah Berhad. Your recommendation must be supported with capital budgeting decision criterions.

Answer rating: 100% (QA)

Answer D The viability of housing project in puncak alam to megah berhad is very good because the pr... View the full answer