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Goldrums Ltd s trying to decide which project should be taken up, out of three possible investments. The initial investment would amount RM25,000. Scrap value at end of use would be nil.

Cost of capital is 12%. The net cash inflows from three projects under consideration are:


Year Project N (RM) Project V (RM) Project Q (RM)
1 7,000 12,000 10,000
2 6,000 12,000 10,000
3 8,000 15,000 10,000
4 10,000 - 11,000
5 12,000 - 11,000


For each possible project you are required to calculate capital budgeting and choose the best project under:


  • Payback (7m)
  • Net Present Value  (11m)
  • State one advantage and one disadvantage of payback period. (2m)

Replies (10)

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By Wanderer
14th Jul 2021 19:11

Piggy, really not a good idea to ask others to do your homework.

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Replying to Wanderer:
By Hugo Fair
14th Jul 2021 19:53

Also this is a UK site ... so reference to Malaysian Ringgits (suggesting the question is about a company trading in that jurisdiction) would be beyond the remit of the members - even if one was inclined to help you out on your cheeky request.

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Replying to Hugo Fair:
By David Ex
14th Jul 2021 19:57

Hugo Fair wrote:

even if one was inclined to help you out on your cheeky request.

It’s the bone-idleness that really grates. Not asking for assistance; asking for someone to do it for them.

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Replying to David Ex:
By Leywood
14th Jul 2021 20:03

Yes, agreed. Not even a half arsed attempt.

Not a 'please' in sight.

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By David Ex
14th Jul 2021 19:50
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By SXGuy
15th Jul 2021 07:48

I'll help

The answer is yes, or was it no, probably a maybe.

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By I'msorryIhaven'taclue
15th Jul 2021 09:41

"Cost of capital is 12%..."

The question doesn't specify whether interest is to be calculated on a "compound" basis so that, for example, using Project N (and for simplicity's sake let's suppose the net cash inflows are brought into account at the end of each year rather than accruing evenly throughout) the interest for year 1 would be RM25K x 12% and for year 2 (RM25K-RM7K) x 12% and so on (so that eventually, during Year 5 using the assumed criteria, the cost of capital produces a positive inflow).

Or is Piggy supposed to assume that all of the net cash inflows are brought into account at the end of Year 5? (In which event the straight-line RM25K @ 12% p.a. would be the order of the day)

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A Putey FACA
By Arthur Putey
15th Jul 2021 09:53

The answer is take out a huge loan and do all 3 projects, but don't give PGs

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Replying to Arthur Putey:
By I'msorryIhaven'taclue
15th Jul 2021 10:06

Ahha, well with a loan Piggy would be able to purchase the answer from:

Very lazy of Piggy's lecturer to not bother changing the name Goldrums or vary any of the inflow amounts.

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By AndyC555
15th Jul 2021 11:02

"The answers to your questions are 'yes', 'yes' and 'no' but not necessarily in that order"
Roy Jenkins answering questions in the HoC.

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