5. You're the CFO of Pathao Foods. The company has 210,000 shares outstanding which arecurrently trading in market for BDT 36. The company's past dividend payments are given below:201520162017201820192020BDT 5.3BDT 5.8BDT 6.5BDT 5BDT 6.2BDT 6.5Pathao Food also has 6,000 bonds outstanding. The bonds carry a 7 % coupon, pay couponannually, and matures in 10 years. The bonds are selling at 95% of face value.Pathao Food is evaluating a project to buy 5 freezing vans to expand it's existing food deliverybusiness. This project would enable the company to generate yearly revenue of BDT 10 millionand incur yearly operating cost of BDT 6 million. The project will have 5 years life and wouldrequire an investment of BDT 1.5 million for each freezing van. The total registration cost of thefreezing vans would be BDT 500,000. These vans will be depreciated using 3 years MACRS andcan be scraped for BDT 1 million after the useful life is over. The average tax rate is 35%.Required:Evaluate the project's feasibility using discounted payback period, net present value and internalrate of return decision rules and decide to accept/reject the project. Note: Pathao Foods wantto recovers its initial investment within 3 years with nominal cash flows and in 3.5 years withreal value of cash flows.

Answered: 5. You're the CFO of Pathao Foods. The…

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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