A company has evaluated the potential for investment in 2 projects (Project X and Project...
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A company has evaluated the potential for investment in 2 projects (Project X and Project Y). Both projects have been shown to be worthwhile investments but a choice has to be made between them. Cash flows are estimated to be: Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Project X RM000 (1,000) 200 300 400 500 600 Project Y RM000 (1,000) 400 400 400 400 400 The company's cost of capital is based upon: Proportion of total long term capital Equity 65% Debt 35% Cost per annum 14% 9% Required: (a) Calculate the company's weighted average cost of capital. (b) Calculate Net Present Value (NPV) for Project X and Project Y. (c) Calculate Internal Rate of Return (IRR) for Project X and Project Y. (d) Calculate Modified Internal Rate of Return (MIRR) for Project X and Project Y. (e) Calculate Discounted Payback Period (DPP) for Project X and Project Y. (1) Calculate Profitability Index (Pl) for Project X and Project Y. (9) From calculation (a) (f), which project should be selected. Explain
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