3.AR Chan Limited has three possible projects but only one can beundertaken because of limited finance for investment.Some details have been lost and the person responsible is ill,however, the company has the following information:LiInitial investmentANet operating cashflow each £25,000yearResidual value of investmentLife of project in yearsPayback period in yearsNet present value at 10% pa£15,00075BDong£150,000C£5,0005D£0Shi£113,000ERequired(a) Calculate the missing values of A, B, C, D, E and F.£096.5F(b) Calculate each project's Internal Rate of Return (IRR), using15% as the other rate, needed.(c) State which project should be undertaken to maximiseshareholder wealth and justify your choice with supportingideas.(d) Explain ONE disadvantage for each of Payback Period, NetPresent Value and Internal Rate of Return as methods ofinvestment appraisal.

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AR Chan Limited has three possible projects but only one can be undertaken because of limited finance for investment. Some details have been lost and the person responsible is ill, however, the company has the following information: Initial investment Net operating cashflow each year Residual value of investment Life of project in years Li A £25,000 £15,000 7 Dong £150,000 C £5,000 5 Shi £113,000 E £0 9

AR Chan Limited has three possible projects but only one can be undertaken because of limited finance for investment. Some details have been lost and the person responsible is ill, however, the company has the following information: Initial investment Net operating cashflow each year Residual value of investment Life of project in years Li A £25,000 £15,000 7 Dong £150,000 C £5,000 5 Shi £113,000 E £0 9

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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