Hasbro Plc, an airline navigation supplier, is in the process of buying a start-of-the art navigation software. The initial investment in the new software is £130,000. The annual cash flows are expected to be: Year 1 £38,000 Year 2 £43,000 Year 3 £50,000 Hasbro Plc employs a cost of capital of 6%. The rate of inflation is expected to be 3% for the duration of the project. Required: a) Calculate the NPV of the project using the money cost of capital as the discount rate, and state clearly whether the project should be undertaken by the company. b) Calculate the NPV of the project using the real rate of return as the discount rate (round up to 2 decimal places), and state clearly whether the project should be undertaken by the company. c) Discuss the likely impact of your outcomes in parts a) and b) above on Hasbro Plc.

Delta Plc is considering investing in bespoke software solutions, which require an initial investment of £130,000. The annual cash inflows during years 1-3 are expected to be £38,000 for year 1; £43,000 for year 2 and £50,000 for year 3. The company’s money cost of capital is 6% and inflation is expected to be 3% during the life of the project. Required: a) Calculate the ARR of the project, taking inflation into account. b) Calculate the (undiscounted) Payback Period of the project, taking inflation into account. c) Calculate the NPV of the project using the money cost of capital as the discount rate, and state clearly whether the project should be undertaken by the company.

Limitless Ltd. is planning to buy a new warehouse to store its production output. Theinvestment would require £500,000 to be paid upfront. Thanks to the new warehouse,the company expects to increase its profits by £120,000 annually for the next five years,and then £60,000 for the following five years. 1. Calculate the Net Present Value (NPV) of this investment opportunity if the cost ofcapital is 12%.  2. What is the payback period of this investment?

Delta Plc is considering investing in bespoke software solutions, which requires an initial investment of £130,000. The annual cash inflows during years 1-3 are expected to be £38,000 for year 1; £43,000 for year 2 and £50,000 for year 3. The company’s money cost of capital is 6% and inflation is expected to be 3% during the life of the project. Required: c) Calculate the NPV of the project using the money cost of capital as the discount rate, and state clearly whether the project should be undertaken by the company. d) Calculate the NPV of the project using the real rate of return as the discount rate (round up to 2 decimal places), and state clearly whether the project should be undertaken by the company. e) Discuss the likely impact of your outcomes in parts c) and d) above on Delta Plc.

Delta Plc is considering investing in bespoke software solutions, which requires an initial investment of £130,000. The annual cash inflows during years 1-3 are expected to be £38,000 for year 1; £43,000 for year 2 and £50,000 for year 3. The company’s money cost of capital is 6% and inflation is expected to be 3% during the life of the project. a) Calculate the ARR of the project, taking inflation into account.  b) Calculate the (undiscounted) Payback Period of the project, taking inflation into account.  c) Calculate the NPV of the project using the money cost of capital as the discount rate.  d) Calculate the NPV of the project using the real rate of return as the discount rate (round up to 2 decimal places).  e) Discuss the impact that the decision made on the project acceptance based on the money cost of capital and real rate of return would have on Delta Plc.

Delta Plc is considering investing in bespoke software solutions, which requires an initial investment of £150,000. The annual cash inflows during years 1-3 are expected to be £50,000 for year 1; £55,000 for year 2 and £62,000 for year 3. The company’s money cost of capital is 7% and inflation is expected to be 4% during the life of the project. Required: a) Calculate the NPV of the project using the real rate of return as the discount rate (round up to 2 decimal places).  b) Discuss the impact that the decision made on the project acceptance based on the money cost of capital and real rate of return would have on Delta Plc.

Company A is evaluating two investment projects: Project X and Project Y. The initial investment for Project X is £20,000, and it is expected to generate net cash flows of £10,000 per year for 3 years. Project B requires an initial investment of £40,000 and is expected to generate net cash flows of £15,000 per year for 4 years. Calculate the profitability index (PI) for each project and advise which project the company should choose if the PI is the primary investment decision criterion. Use a discount rate of 8%.

ABC Ltd is considering adding a new product line. Adding the product line would require additional investment of £0.5 million today and would return cash flow of £0.6 million in one years time.ABCs assets consist of £0.5 million in cash, as well as production facilities to produce its existing products. Next year these facilities will return cash flows of £5 million if the demand is high and £2 million if the demand is low. The probability of high demand is 70% . The firms discount rate is 0% and you can ignore all cash flows extending beyond one year.Assume that ABC has no debt. (a) What is the expected net worth of ABCs owners if they do not add the new product line and instead pay the cash out as dividends? ( b) What is the expected net worth of ABCs owners if they choose to add the new product line instead of paying out dividends? (c) Now redo assuming the company has debt with face value $2.5 million due in one year. What is the expected net worth of ABCs owners if they do not add…

Blue Plc is considering investing in a project. The project requires an initial investment of €200,000 and will yield cash inflows in years one to three of €135,000 per annum. The company’s cost of capital is 7%. What is the NPV of the project? €154,240 €354,240 €605,000 €205,000

(a) Jireh Housing Limited is a UK based property developer and is considering a project in Ghana which would require an outlay of £1.6 million at the outset. The money cash flows receivable from sales will depend on the specific inflation rate for Jireh property. This is anticipated to be 4% per annum. Cash outflows consist of four elements: labour, materials, overheads, and machinery maintenance. Labour costs are expected to increase by 5% per annum, materials by 3%, overheads by 4%, and machinery maintenance by 1%. Jireh’s requires a real rate of return of 16% on projects of this risk class, and anticipates the general rate of inflation to be 2% per annum over the 3-year life of the project. Annual cash flows in present (Time 0) prices are as follows:                                                    £m                           InflationSales                                            3.4                               4%Labour                                         0.8…