Assume the corporate discount rate is 10 percent, please offer your recommendations by ranking the projects, backed by your analysis using: (i) Net Present Value (ii) Profitability Index (iii) Payback period, and (iv) Critique the flaws of each technique. [6 marks] [5 marks] [3 marks] [6 marks] Total [20 marks]
Assume the corporate discount rate is 10 percent, please offer your recommendations by ranking the projects, backed by your analysis using: (i) Net Present Value (ii) Profitability Index (iii) Payback period, and (iv) Critique the flaws of each technique. [6 marks] [5 marks] [3 marks] [6 marks] Total [20 marks]
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
Related questions
Question
![QUESTION ONE
You are a senior manager at Zambia Airways and have been authorized to spend up to
K400,000 for projects. The three projects you are considering have the following
characteristics:
Project
Project A
Details
Initial investment of K280,000. Cash flow of K190,000 at year 1
and K170,000 at year 2. This is a plant expansion project.
Initial investment of K390,000. Cash flow of K270,000 at year 1
and K240,000 at year 2. This is a new product development
project.
Initial investment of K230,000. Cash flow of K160,000 at year 1
and K190,000 at year 2. This is a market expansion project.
Project B
Project C
Assume the corporate discount rate is 10 percent, please offer your recommendations by
ranking the projects, backed by your analysis using:
(i) Net Present Value
(ii) Profitability Index
(iii) Payback period, and
(iv) Critique the flaws of each technique.
[6 marks]
[5 marks]
[3 marks]
[6 marks]
Total [20 marks]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e7ad9a9-62d5-4b83-92a6-a47fdb1d6001%2Fe5599cb1-70a6-422d-9d28-aa7f03fc2f47%2Fllteiy6_processed.png&w=3840&q=75)
Transcribed Image Text:QUESTION ONE
You are a senior manager at Zambia Airways and have been authorized to spend up to
K400,000 for projects. The three projects you are considering have the following
characteristics:
Project
Project A
Details
Initial investment of K280,000. Cash flow of K190,000 at year 1
and K170,000 at year 2. This is a plant expansion project.
Initial investment of K390,000. Cash flow of K270,000 at year 1
and K240,000 at year 2. This is a new product development
project.
Initial investment of K230,000. Cash flow of K160,000 at year 1
and K190,000 at year 2. This is a market expansion project.
Project B
Project C
Assume the corporate discount rate is 10 percent, please offer your recommendations by
ranking the projects, backed by your analysis using:
(i) Net Present Value
(ii) Profitability Index
(iii) Payback period, and
(iv) Critique the flaws of each technique.
[6 marks]
[5 marks]
[3 marks]
[6 marks]
Total [20 marks]
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