A company has recently raised Sh. 15,000,000. The finance director has the task of evaluating a project which has 4 years of economic life and zero salvage value. The expected cash flows are as follows:Project YearCash Flows (Sh.) 15,000,00024,000,00033,800,0004 800,000 Given that company’s cost of capital is 30% and that the amount raised would be used to finance the project, advice the company based on.i. Payback periodii. Net present value of the project

The payback period of the project is the period within which initial investments is generally…

Answered: Given that company’s cost of capital is…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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A company has recently raised Sh. 15,000,000. The finance director has the task of evaluating a project which has 4 years of economic life and zero salvage value. The expected cash flows are as follows:

Project Year	Cash Flows (Sh.)

1	5,000,000
2	4,000,000
3	3,800,000
4	800,000

Given that company’s cost of capital is 30% and that the amount raised would be used to finance the project, advice the company based on.

i. Payback period

ii. Net present value of the project

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how will you advice the company based on the

1) payback period

2) Net present value of the project

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