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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Describe Five (5) ways in which the investment appraisal approach of a Municipal Assembly will differ from a mining company
- God is King Ltd has been printing all its magazines from Dubai due to the
comparative cost advantage. The company is considering establishing its own printing department, and the R&D team has identified a printing machine which will meet the quality and cost specification of God is King Ltd. The machine also has the capacity to print to meet the market needs of the company. The machine, which has a useful life of 5 years, will cost GHS800, 000 and immediate installation cost will be GHS50, 000. Fixed cost for maintaining the machine will be 170,000 per annum over the machines useful life and additional working capital of 30,000 will be introduced in year 2. The use of this machine will generate a contribution of GHS 500,000 per annum for five (5) years. Corporate income tax rate, payable in areas, is 25% and the companies after tax cost of capital is 20%. No capital allowance is permitted. Required: Calculate theNPV for the project and advise management on whether to accept or reject the project.
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