Reference no: EM132508347

Pomely Sdn Bhd is evaluating the data for two projects as follows:

                                     Project A (RM)         Project B (RM)

Initial Investment ----> 21,000                         22,500

Year              Operating              Cash Inflow

1 -                   7,000                14,000

2 -                   7,000                 6,000

3 -                   7,000                5,000

4 -                   7,000                5,000

5 -                     7,000               5,000

For each project, calculate the following capital budgeting techniques:

Question (a) Accounting Rate of Return (Assume salvage value = 0)

Question (b) Payback Period

Question (c) Net Present Value (Use cost of capital = 10 percent)

Question (d) Profitability Index (Use the same cost of capital in (c) above)