Melati Sdn.Bhd. is taking into consideration a project which requires an initial outlay of RM380,000. The...

 

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Melati Sdn.Bhd. is taking into consideration a project which requires an initial outlay of RM380,000. The cash flows expected from the project are as follows: Year Cash flow (RM) 1 100,000 2 3 4 5 120,000 110,000 100,000 110,000 The cost of capital for this project is 10%. (a) Calculate the payback period for this project. (2) (b) Calculate the net present value and determine whether the project should be accepted or rejected. (10) (c) Explain the advantages and disadvantages of using the net present value technique in evaluating a project. (8) Melati Sdn.Bhd. is taking into consideration a project which requires an initial outlay of RM380,000. The cash flows expected from the project are as follows: Year Cash flow (RM) 1 100,000 2 3 4 5 120,000 110,000 100,000 110,000 The cost of capital for this project is 10%. (a) Calculate the payback period for this project. (2) (b) Calculate the net present value and determine whether the project should be accepted or rejected. (10) (c) Explain the advantages and disadvantages of using the net present value technique in evaluating a project. (8)

Answer rating: 100% (QA)

a To calculate the payback period we need to determine the time it takes for the cumulative cash inflows to equal or exceed the initial outlay of RM38... View the full answer