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1) Ali Corporation is planning to make an investment of RM360

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1) Ali Corporation is planning to make an investment of RM360.000 in one of the three (3)

alternatives shopping centers in Selangor. Each projects expected cash flows from the

investment are as follows (in RM):

Year               Supermarket A                       Supermarket B                       Supermarket C

1                     144,000                                  120,000                                            96,000

2                     144,000                                  120,000                                            108,000

3                     96,000                                    120,000                                              138,000

4                     96,000                                    120,000                                              168,000

The company cost of capital is 12% and these projects are mutually exclusive.

a) Calculate the following:

i)       Payback period for the three (3) projects.                                                    

 ii)       Net Present Value for the three (3) projects.                                               

iii) Which projects should be selected and state your reasons.  

2) Sue Rie Berhad is considering two mutually exclusive projects, SS and MM whose involve in an investment cost of RM400,000. The cost of capital is 12% and expected cash flow for each project is given below:

Year               Project SS (RM)                     Project MM (RM)

1                     150,000                                  180,000

2                     150,000                                  180,000

3                     150,000                                  140,000

4                     150,000                                  120,000

a) Calculate the followings:

i) Payback period for both projects.                                                                        

ii) Net Present Value for the two projects.                                                          

iii) Internal rate of Return for Project SS only.                                                          

iv) Which project should be accepted? Why?                                                     

b) Define the word "initial outlay".