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Simson Berhad has three mutually exclusive projects under consideration. The expected cash flows are given in...

Simson Berhad has three mutually exclusive projects under consideration. The expected cash flows are given in the following table. The minimum required rate of return on any project chosen by Simson bhd is 10.5%.

Project A

Project B

Project C

Initial Investment RM

484m

682m

467m

Years

Cash Flows RM in million

1

128

150

95

2

241

265

239

3

115

246

216

4

105

227

96

5

95

94

53

6

15

26

12

Environment restoration cost

50

73

44

The government, regulators and NGOs insist that the company should restore the environment to the pre-project scenario, the company accountant estimates the above restoration costs at the end of year six.

Required:

  1. Calculate the payback period for each project. Which project is preferred as per this method?
  1. Calculate the Net Present Value for each project. Which project is preferred as per this method?

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