Question

Rania Corporation is planning to make an investment of RM550,000 in one of the three (3)
alternative shopping malls in Shah Alam. Each project’s expected cash flows from the investment
are as follows (in RM):

Year AEON Giant Central i-City
1 150,000 170,000 70,000
2 140,000 170,000 100,000
3 160,000 170,000 120,000
4 120,000 170,000 160,000
5 90,000 170,000 180,000

The company’s cost of capital is 12% and these projects are mutually exclusive.
Required:
(a) Compute the payback period for the three projects.

[6 MARKS]

(b) Calculate the net present value for the three projects.

[17 MARKS]
(c) Determine the best location which the company should choose based on payback
period and net present value criteria. Justify your answer.

Answer 1

Transcribed Image Textfrom this Question

Rania Corporation is planning to make an investment of RM550,000 in one of the three (3) alternative shopping malls in Shah Alam. Each project's expected cash flows from the investment are as follows (in RM): Year AEON Giant Central i-City 1 150,000 170,000 70,000 2 140,000 170,000 100,000 3 160,000 170,000 120,000 4 120,000 170,000 160,000 5 90,000 170,000 180,000 The company's cost of capital is 12% and these projects are mutually exclusive. Required: (a) Compute the payback period for the three projects. [6 MARKS] (b) Calculate the net present value for the three projects. [17 MARKS] (c) Determine the best location which the company should choose based on payback period and net present value criteria. Justify your answer.