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Analyze the internal rate of return and accounting rate

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Reference no: EM132583126

JTSB is considering two different modifications project to its current manufacturing process. JTSB requires a minimum rate of return of 8%. Other relevant investment information associated with the two projects are as follows:

Investment Information                            Project T1                            Project T2

Initial investment                                   RM500,000                         RM100,000

Annual cash flows                                     RM88,500                          RM34,320

Life of the project                                        10 years                         4 years

Depreciation per year                                  RM50,000                        RM25,000

Question 1: For second proposal, analyze the following for each project T1 and T2 (show all workings):

i. Accounting rate of return

ii. Net present value

iii. Internal rate of return

iv. Given that only one project can be selected, which project should JTSB choose? What are the TWO (2) reasons of the decision.

Reference no: EM132583126

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