Part B: Reflection (10 marks) We have covered the concept of capital budgeting in week 7. This question is based on the concepts covered in that week. Suppose, a retailer is planning to open a new store either in Sydney or in Melbourne. The financial analyst of the organization has made the following estimate on initial investment and the expected cash flows for the next four years:

The company uses 10% as the discount rate for this type of projects. The companys CEO is considering two capital budgeting techniques NPV and payback period. Between NPV and payback period, which capital budgeting technique should the CEO consider in making the decision and why? Which of these projects should be chosen? Discuss. [10 marks] Further information: Please note the discussions and examples on capital budgeting techniques, like NPV, payback period etc. in week 7. Also, note the issues linked to the use of these techniques. Please also note in slides how decisions are made when choosing between mutually exclusive projects for NPV, the project with the highest and positive NPV is to be chosen; for payback period, the project with the lowest payback period is chosen. You may also note relevant resources and research from the library; and you may show calculations, similar to that done in week 7, to substantiate the answer. Please then discuss based on your understanding and citing any relevant research or resource. [Part B: Maximum 800 words] Additional Marks (5 marks): Overall presentation 2 marks Appropriate referencing (APA style)

Year initial investment Sydney $2,000,000 $800,000 $1,000,000 $1,000,000 $1,000,000 Melbourne $2,000,000 $1,000,000 $1,000,000 $700,000 $700,000