REVIEW QUESTION

A company is considering two mutually exclusive projects requiring an initial cash outlay of Sh 10,000 each and with a useful life of 5 years. The company required rate of return is 10% and the appropriate corporate tax rate is 50%. The projects will be depreciated on a straight line basis. The before depreciation and taxes cashflows expected to be generated by the projects are as follows.

YEAR 1 2 3 4 5

Project A Shs 4,000 4,000 4,000 4,000

Project B Shs 6,000 3,000 2,000 5,000

Required:

Calculate for each project

i. The payback period

ii. The average rate of return

iii. The net present value

iv. Profitability index

v. The internal rate of return

Which project should be accepted? Why?

asked by guest
on Nov 28, 2024 at 3:25 am



Mathbot Says...

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