Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the investment project.  The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s        (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12%   Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the investment project.  The annual incremental profits/ (losses) relating to the investment are estimated as follows:

Years

CF’s

       (000)

Year 0

-175,000

Year 1

K11,000

Year 2

K3,000

Year 3

K34,000

Year 4

K47,000

Year 5

K8,000

Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12%

 

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

D.f

1.00

0.893

0.797

0.712

0.636

0.567

 

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