e) Based on the answer in (a) – (d), explain briefly which project should be accepted. f) If the project is independent project, how would your answer change in part (e) Note: I need only e,f no question answer. only e and f
e) Based on the answer in (a) – (d), explain briefly which project should be accepted. f) If the project is independent project, how would your answer change in part (e) Note: I need only e,f no question answer. only e and f
Chapter10: The Basics Of Capital Budgeting: Evaluating Cash Flows
Section: Chapter Questions
Problem 23SP
Related questions
Question
a) Calculate the payback period for each project. The maximum allowable payback period set
by the company for all projects is 3 years.
b) Calculate the
c) Calculate the profitability index (PI) for each project
d) Calculate the
e) Based on the answer in (a) – (d), explain briefly which project should be accepted.
f) If the project is independent project, how would your answer change in part (e)
Note: I need only e,f no question answer.
only e and f
Transcribed Image Text:QUESTION 3
Fitch Industries is in the process of choosing the better of two equal-risk, mutually exclusive
capital expenditure projects-M and N. The relevant cash flows for each project are shown in
the following table. The firm's cost of capital is 14%.
Project M (RM)
Project N (RM)
Initial Investment (RM)
28,500
27,000
Year
Cash Flow (RM)
1
10,000
11,000
2
10,000
10,000
3
10,000
9,000
4
10,000
8,000
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