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Sapphire Project and Jade Project of equal risk are alternative for expanding Sinaran Company Capacity. The...

Sapphire Project and Jade Project of equal risk are alternative for expanding Sinaran Company Capacity. The firms cost of capital is 13%. The initial investment and cash flows associated with these projects are shown in the following table.

Initial Investment (CF0)

Sapphire Project

Jade Project

RM80,000

RM50,000

Year (t)

Cash inflows (CFt)

RM

0

-365,000

-40,000

1

38,000

20,300

2

47,000

15,200

3

62,000

14,100

4

455,000

11,200
  1. Calculate the payback period for each project. Which investment will you choose? Why?

  

  1. Calculate the net present value (NPV) for each project. Which investment will you choose? Why?

  1. Calculate the profitability Index (PI) for each project. Which investment will you choose? Why?

  

  1. Based on your answers in (a) through (c), which project will you finally choose? Explain why?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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