QUESTION 5

Pesona Berhad is evaluating two mutually exclusive projects that require an initial investment of RM50,000. The cash flows for each project are given as follows:

Year	Project 1(RM)	Project 2 (RM)
1	10,000	15,000
2	20,000	15,000
3	26,000	15,000
4	25,000	15,000
5	15,000	15,000

The cost of capital is 15%.

Calculate the following:

a.

Payback period for both projects.

(4 marks)

b.

Net present value for both projects.

(6 marks)

c.

Internal rate of return for both projects.

(6 marks)

d.

Which project should Pesona Berhad choose? Why?.

(4 marks)

(Total 20 marks)

(Overall 100 marks)

(Overall 100 marks) (Total 20 marks)