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Capital Budgeting and Working Capital
a) Kim Limited is considering two mutually exclusive investments both of which cost $50,000. The required rate of capital for both investments is 10 percent. The cash flows are as follows:
Year Project Ruby Project Jade
1 $30,000 $25,000
2 20,000 15,000
3 15,000 40,000
i. Which of the two projects should be chosen based on the payback method?
ii. Which of the two projects should be chosen based on the net present value method?
iii. Which of the two projects should be chosen based on the profitability index method?
b) Can a firm have a negative cash cycle? If yes, explain how that can occur and discuss whether or not that would be good for a firm. If no, explain why that cannot occur and why preventing it from occurring is good for a firm.
C) What are some of the pros and cons of a JIT inventory management system?
other measures other measures than npv and irr 250 words1.there are other measures used in capital budgeting decisions
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