SITI NURZAHIRA BINTI YAHYA 2018279282 BA111 4A6

FIN242 , CHAPTER 12

 JUN19

i. Payback Period

Same CF Different CF
Project A Project B
50 000 4+(80 000−70 000)
PP = PP =
15 000 70 000
= 3.3 years = 4.1 years

ii. Net Present Value

Same CF Different CF
A B
NPV = (0 × (10%,1)) + ((0 × (10%,2)) + (70 000 ×
NPV = 15 000 (PVIFA, 10%, 5) – PVIF (10%,3)) + (0× (10%,4))
50 000 + (70 000 × (10%,5)) – 80 000
= 15 000 (3.7908) – 50 000
= RM 6 862 = (70 000 × (0.7513)) + (70 000 ×
(0.6209)) - 80 000
= RM 52 591 + RM 43 463 - 80 000
= RM 16 054

iii. IRR (Project A

50 000 = 15 000
(PVIFA, 5) = 50 000/15 000
(PVIFA, 5) = 3.3333

Do Interpolation :
15% = 3.3522
? = 3.3333
16% = 3.2743

% = (1% X 0.0189 / 0.0779) + 15%

% = 15.24%

iv. For NPV, Project with higher NPV are preferred. NPV(B) is higher than NPV (A). While, for PP,
the Shortest P.P is favorable. In this Case, Project A is better due to shortest payback period
(P.P).
DEC18
i. Payback Period

Same CF Different CF
Machine B Machine A
120 000 3+(120 000−105 000)
PP = PP =
40 000 30 000

= 3 years = 3.5 years

ii. Net Present Value

Same CF Different CF
Machine B Machine A
NPV = (40 000 × (PVIF 12%,1)) + (35 000 × (PVIF
NPV = 40 000 (PVIFA, 12%, 5) – 12%,2)) + (30 000 × PVIF (12%,3)) + (25 000 ×
50 000 (10%,4))
= 40 000 (3.6048) – 120 000 + (20 000 × (12%,5)) – 120 000
= RM 24 192
= (40 000 × (0.8929)) + (35 000 × (0.7972)) +
(30 000 × (0.7118)) + (25 000 × (0.6355))
+ (20 000 × (0.5674)) – 120 000

= RM 35 716 + RM 27 902 + RM 21 354 + RM

15 887.5 + RM 11 348 - 120 000
= RM 7 792.5 *Unprofitable (-ve)

iii. IRR

120 000 = 40 000 (PVIFA, %, 5)

(PVIFA, %, 5) = 120 000/40 000
(PVIFA, %, 5) = 3.000

Do Interpolation

18% = 3.1272
? = 3.000
20% = 2.9906

% = (2% X 0.1272 / 0.1366) + 18%

% = 19.86%

iv. For NPV, Project with higher NPV are preferred. NPV(B) is higher than NPV (A). While, for PP,
the Shortest P.P is favorable. In this Case, Machine B is better due to shortest payback period
(P.P).
 JUN18
i. Payback Period

Same CF Different CF
Project Q Project p
480 000 3+( 400 000−280 000)
PP = PP =
132 000 100 000

= 3.63 years = 4.2 years

ii. Net Present Value

Same CF Different CF
Project Q Project P
NPV = (80 000 × (PVIF 12%,1)) + (100 000 × (PVIF
NPV = 132 000 (PVIFA, 12%, 5) – 480 12%,2)) + (100 000 × PVIF (12%,3)) + (200 000 ×
000 (10%,4)) + (100 000 × (12%,5)) – 480 000
= 132 000 (3.6048) – 480 000
= RM 4 166.4 *Unprofitable (-ve) = (80 000 × (0.8929)) + (100 000× (0.7972)) + (100
000 × (0.7118)) + (200 000 × (0.6355)) + (100 000 ×
(0.5674)) – 480 000

= RM 71 432 + RM 79 720 + RM 71 180 + RM 127

100 + RM 56 740 - 400 000
= RM 6 172

iii. 480 000 = 132 000 (PVIFA, %, 5)

(PVIFA, %, 5) = 480 000/132 000
(PVIFA, %, 5) = 3.6363

Do Interpolation

11% = 3.6959
? = 3. 6363
12% = 3.6048

% = (1% X 0.0596 / 0.0911) + 11%

% = 11.65%

iv. ∴ Project with higher NPV are preferred. NPV (P) is higher than NPV (Q).
 JAN18
i. Payback Period

Same CF Different CF
System B System A
45 000 4+(45 000−44 000)
PP = PP =
15 000 12000

= 3 years = 4.08 years

ii. Net Present Value

Same CF Different CF
System B System A
NPV = (25 000 × PVIF (10%,1)) + (-7 000 × (10%,2)) +
NPV = 15 000 (PVIFA, 10%, 5) – 45 000 (14 000 × PVIF (10%,3)) + (12 000 × (10%,4)) + (20 000
= 15 000 (3.7908) – 45 000 × (10%,5)) – 80 000
= RM 11 862
= (25 000 × (0.9091)) + (-7 000 × (0.8264)) + (14
000 × 0.7513)) + (12 000 × (0.6830)) + (20 000 ×
(0.6209)) – 45 000

= RM 22 727.5 - RM 5 784.8 + RM 10 518.2 + RM 8

196 + RM 12 418 - 45 000
= RM 3 074.9

iii. IRR

45 000 = 15 000 (PVIFA, %, 5)

(PVIFA, %, 5) = 45 000/15 000
(PVIFA, %, 5) = 3.000

Do Interpolation

18% = 3.1272
? = 3.000
20% = 2.9906

% = (2% X 0.1272 / 0.1366) + 18%

% = 19.86%

iv. For NPV, Project with higher NPV are preferred. NPV(B) is higher than NPV (A). While, for PP,
the Shortest P.P is favorable. In this Case, System B is better due to shortest payback period
(P.P).
 MAC17
i. Net Present Value

Same CF Different CF
Machine X Machine Y
NPV = (100 000 × (PVIF 12%,1)) + (109 000 × (PVIF
NPV = 80 000 (PVIFA, 12%, 5) – 245 000 12%,2)) + (95 000 × PVIF (12%,3)) + (80 000 × (10%,4))
= 80 000 (3.0373) – 245 000 – 269 000
= RM 2 016 *Unprofitable (-ve)
= (100 000 × (0.8929)) + (109 000× (0.7972)) + (95
000 × (0.7118)) + (80 000 × (0.6355)) – 480 000

= RM 89 290 + RM 86 894.8 + RM 67 621 + RM 50

840 - 269 000
= RM 25 645.8

ii. Payback Period

Same CF Different CF
Machine X Machine Y
245 000 2+(269 000−209 000)
PP = PP =
80 000 109 000

= 3.06 years = 2.55 years

iii. IRR

245 000 = 80 000 (PVIFA, %, 4)

(PVIFA, %, 4) = 245 000/80 000
(PVIFA, %, 4) = 3.0625

Do Interpolation

11% = 3.1024
? = 3.0625
12% = 3.0373

% = (1% X 0.0399 / 0.0651) + 11%

% = 12.58%, 11.70

iv. For , Payback Period the Shortest P.P is favorable. In this Case, Machine Y is better due to
shortest payback period (P.P). While, for NPV the machine with higher NPV are preferred.
NPV(Y) is higher than NPV (X).
 OCT16
i. Payback Period

Same CF Different CF
Molding B Molding A
10 000 1+(10 000−7 000)
PP = PP =
4 000 7 000

= 2.5 years = 1.42 years - 1.86

∴ Payback Period the Shortest P.P is favorable. In this Case, Molding A is better due to
shortest payback period (P.P).

ii. Net Present Value

Same CF Different CF
Molding B Molding A
NPV = (7 000 × PVIF (10%,1)) + (3 500 × (10%,2)) + (3
NPV = 4 000 (PVIFA, 10%, 5) – 10 000 000 × PVIF (10%,3)) + (1 500 × (10%,4)) + (2 500 ×
= 4 000 (3.7908) – 10 000 (10%,5)) – 10 000
= RM 5 163.2
= (7 000 × (0.9091)) + ( 3 500 × (0.8264)) + (3 000
× 0.7513)) + (1 500 × (0.6830)) + (2 500 × (0.6209)) –
10 000

= RM 6 363.7 + RM 2 892.4 + RM 2 253.9 + RM 1

024.5 + RM 1 552.25 - 10 000
= RM 4 086.75 * unprofitable

∴ NPV the machine with higher NPV are preferred. NPV(B) is higher than NPV (A).

iii. IRR not complete

10 000 = 4 000 (PVIFA, %, 4)

(PVIFA, %, 5) = 10 000 / 4 000
(PVIFA, %, 5) = 2.5000

Do Interpolation

28% = 2.5320
? = 2.5000
32% = 2.3452

% = (4% X 0.032 / 0.1868) + 28%

% = 28.68%