QUESTION 1 WP SETIA Ltd is currently considering to enter a long term lease project in respect to multi-purpose hall unit. This multi-purpose hall will then be rented out to earn rental & event income. The following information are relating to this project: 1) The initial payment for the hall is RM720,000. This is to be paid at lump sum. There are also additional basic renovation cost to be incurred at the beginning at RM150,000. 2) The contract length for the lease is 5 years. At the end of Year 5, the lease right is sellable to new lessor worth RM50,000. The hall shall be recognized as fixed asset on the balance sheet & it is to depreciate using straight line method. No residual value is expected from these assets. 3) Expected rental income is RM280,000 per annum 4) Expected event income is RM40,000 per annum 5) Expected expenses (excluding depreciation) is RM50,000 per annum. 6) The expected rental income, event income & expenses are to be increased by a flat one time rate of 10% from Year 3 onwards. 7) The Company would like to have 15% return on this investment. 8) The present value of RM1 at 10%, 15%, 20% are: Year 1 2 3 4 5 10% 0.909 0.826 0.751 0.683 0.620 15% 0.870 0.756 0.658 0.572 0.497 20% 0.833 0.694 0.579 0.482 0.402 Required: a. Calculate the payback period, net present value, internal rate of return and accounting rate of return of the planned investment project. (20 marks) b. Critically evaluate the importance of relevant cost in capital budgeting.