You have been approached by one of your clients to give him an investment advice regarding...

You have been approached by one of your clients to give him an investment advice regarding his investment portfolios. He has divided equally his RM500k into two investment portfolios: A and B for five (5) years period. The expected future net cash flows are given in percentage as shown in the table below.

Year	Investment A (RM)	Investment B (RM)
0	Initial Capital (250,000)	Initial Capital (250,000)
1	40%	42%
2	32%	34%
3	28%	16%
4	16%	24%
5	10%	28%
TOTAL CASH INFLOWS	RM?	RM?

You are required to;

Compute each year’s cash flows for both investments according to the cash flow rate given.

Using Payback period approach, determine which Investment portfolio should be accepted. Support your judgement.

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jeff jeffy answered 2 years ago

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