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Delight Limited is considering its capital budgets for the year 2022. The following information relates to three mutually exclusive projects that the management is contemplating...

      

Delight Limited is considering its capital budgets for the year 2022. The following information relates to three mutually exclusive projects that the management is contemplating to undertake.

Project Initial cash outflows Cash inflows
Sh. "000" Sh. "000"
Year 1 Year 2 Year 3
A (8,000) 2,000 4,000 6,000
B (10,000) 4,000 6,000 6,000
C (20,000) 8,000 12,000 10,000

Additional information:
1. The firm has a capital budget ceiling of sh.20 million.
2. The cost of capital for Delight Limited is 10% per annum.

Required:
Advise the management on the projects to undertake using each of the following investment appraisal techniques.
(i) Net present value.
(ii) Profitability Index.

  

Answers


Francis
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francis1897 answered the question on November 1, 2022 at 13:22


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