Teras venture is considering two mutually exclusive projects. the company has a 14 percent cost of capital and has estimated its cash flows as shown in table 2 below.

table : cash flows for project A and B

YEAR	PROJECT A (RM)	PROJECT B (RM)
0	120,000	90,000
1	40,000	45,000
2	40,000	45,000
3	50,000	20,000
4	50,000	20,000
5	30,000	(5,000)

Table 4: Percent value Facor (PVIF)

Period	8%	9%	10%	12%	14%
1	0.9259	0.9174	0.9091	0.8929	0.8772
2	0.8573	0.8417	0.8264	0.7972	0.7695
3	0.7938	0.7722	0.7513	0.7118	0.6750
4	0.7350	0.7084	0.6830	0.6355	0.5921
5	0.6806	0.6499	0.6209	0.5674	0.5194

Based on the data above, answer the fallowing questions.

(A) Calculate the payback period and net percent value (NPV) for both projects. choose which project should be selected and the state your reasons.

(B) Describe with examples the capital rationing contraints.

Answer rating: 100% (QA)

A To calculate the payback period for each project we need to determine the time it takes for the cu... View the full answer