Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
i) Calculate the payback period for each project.
ii) Calculate the net present value (NPV) for each project.

Transcribed Image Text:A company is considering 2 alternative investment proposals. The first proposal calls for total
replacement of the company's machines and equipment, while the second proposal involves
repairing some parts of the existing machines and equipment. The company will only choose to
implement one of the proposed projects for this year. The projected cash flows associated with
each project are as per table below. The discount rate used by the company is 15%.
YEAR
TOTAL REPLACEMENT (RM'000)
REPAIR (RM"000)
-9,000
-2,400
3,000
2,000
3,000
008
3,000
200
4
3,000
200
3,000
200
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