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Kenvit Ltd. is considering investing in one of the following two projects X and Y, which require an initial cash outlay of sh.2,200,000 each. Each of...

      

Kenvit Ltd. is considering investing in one of the following two projects X and Y, which require an initial cash outlay of sh.2,200,000 each.
Each of the projects has an estimated productive life of five years.

The following information relates to the two projects:
1. The projects will generate the following annual cash inflows:
Year Project X Project Y
Sh. Sh.
1 200,000 400,000
2 600,000 900,000
3 1,200,000 800,000
4 900,000 700,000
5 500,000 600,000
2. The company’s cost of capital is 10% per annum.

Required:
Advice the management of Kenvit Ltd. on the project to undertake based on the following investment evaluation methods:
(i) Net present value (NPV).
(ii) Profitability Index (PI).

  

Answers


Francis
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francis1897 answered the question on November 8, 2022 at 08:30


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