Al Shams Capital group is planning to invest its 1.1 million dirhams in one or...
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Al Shams Capital group is planning to invest its 1.1 million dirhams in one or more of the following projects. Suppose that the average cost of capital is 10%. The proposed initial investment and expected net cash flows for each alternative projects are provided as follows: Projects Initial Investment Year Net cash flows Project A 650,000 dirhams 1 250,000 2 165,000 3 150,000 4 120,000 5 90,000 Project B 850,000 dirhams 1 250,000 2 210,000 3 210,000 4 190,000 5 160,000 Project C 420,000 dirhams 1 100,000 2 190,000 3 80,000 4 120,000 5 90,000 Required? (a) Compute the payback period for each project. (b) Compute the net present value of the projects. (c) Calculate the Profitability index of the projects. (d) Rank the projects based on their payback, NPV and profitability index results. (e) Discuss and interpret the results.
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