2.3 Masuku Ltd is evaluating a 5-year project with an operating (before tax) profit of R100 000 in the first year. The annual profit is expected to increase by 8% per year over the life of the project. The initial cost of the investment is R900 000. From year 1 to year 5, depreciation of R200 000 will be consideteel company's WACC is 15% and a tax rate of 28% applies. Required 2.3.1 Determine the operating cash flow for this project. 2.3.2 Determine the viability of the project using the NPV analysis.
2.3 Masuku Ltd is evaluating a 5-year project with an operating (before tax) profit of R100 000 in the first year. The annual profit is expected to increase by 8% per year over the life of the project. The initial cost of the investment is R900 000. From year 1 to year 5, depreciation of R200 000 will be consideteel company's WACC is 15% and a tax rate of 28% applies. Required 2.3.1 Determine the operating cash flow for this project. 2.3.2 Determine the viability of the project using the NPV analysis.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question number 2.3.1 question 2 only answer please
Transcribed Image Text:Masuku Ltd is evaluating a 5-year project with an operating (before tax) profit of
R100 000 in the first year. The annual profit is expected to increase by 8% per
year over the life of the project. The initial cost of the investment is R900 000. From
year 1 to year 5, depreciation of R200 000 will be considéteel company's
WACC is 15% and a tax rate of 28% applies.
Required
2.3.1 Determine the operating cash flow for this Project.
2.3.2 Determine the viability of the project using the NPV analysis.
2.3
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