Question: Rosnah Ventures Sdn Bhd has the following mutually exclusive projects. Year Project A (RM) Project B (RM) 0 -42,000 -45,000 1 14,000 28,000 2 14,000
Rosnah Ventures Sdn Bhd has the following mutually exclusive projects.
| Year | Project A (RM) | Project B (RM) |
| 0 | -42,000 | -45,000 |
| 1 | 14,000 | 28,000 |
| 2 | 14,000 | 12,000 |
| 3 | 14,000 | 10,000 |
| 4 | 14,000 | 10,000 |
| 5 | 14,000 | 10,000 |
- Suppose Rosnah Ventures Sdn Bhd payback period (PP) cut-off is two years. Compare these two projects.
- Suppose Rosnah Ventures Sdn Bhd uses the Net Present Value (NPV) rule to rank these two projects. Calculate the NPV and choose which project should be chosen if the appropriate discount rate is 10 percent.
- Based on the answer in (a) and (b), identify which project should be undertaken and explain your answer with the support of payback period (PP) and Net Present Value (NPV).
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