SAMPLE QUESTION You are the financial manager for Yirenkyi Investments and Brokers (YIB). Your company...
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SAMPLE QUESTION You are the financial manager for Yirenkyi Investments and Brokers (YIB). Your company is deciding between two projects, ALPHA and BETA to invest in. The following are details regarding both projects. Project ALPHA (GH) 20,000 Project BETA (GH) 200,000 Initial Investment Net Cash Flows: Year 1 Year 2 Year 3 Year 4 Year 5 4,000 10,000 15,000 20,000 20,000 30,000 50,000 65,000 100,000 150,000 Presently, YIB has available cash amounting to GH50,000 and a ready-to-access loan of GH150,000 at a rate of 17% interest per annum. Equity shareholders require a return of 27% on their investments. Required: a. Calculate the Payback period for both projects. b. Calculate the NPV for both projects. c. Calculate Profitability index for both projects. d. Calculate the Internal rate of return for both projects. Advise Management based on your calculations above on which of the two projects YIB should invest in. Provide relevant reasons to support your answer. e
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