(i) Calculate the payback period. Year Cash Flow Cumulative Cash Flow $ Note: Copy the above table and complete the calculations in the answer booklet. (ii) Calculate the net present value. Year Cash Flow Discount Factor at Present Value (to fill the discount factor) $ $ Note: Copy the above table and complete the calculations in the answer booklet. (iii) Advise the management as to whether they should proceed to procure the new equipment. (iv) La Vie Limited is presented with Project Sunny and Project Cloudy. Project Sunny has a payback period of 4.4 years, while Project Cloudy has a payback period of 3.7 years. The company policy is to accept only projects with a payback period of 4 years and below. [Note that part c is independent of part a and b] Required: Advise La Vie Limited, which project should be undertaken and why.
(i) Calculate the payback period. Year Cash Flow Cumulative Cash Flow $ Note: Copy the above table and complete the calculations in the answer booklet. (ii) Calculate the net present value. Year Cash Flow Discount Factor at Present Value (to fill the discount factor) $ $ Note: Copy the above table and complete the calculations in the answer booklet. (iii) Advise the management as to whether they should proceed to procure the new equipment. (iv) La Vie Limited is presented with Project Sunny and Project Cloudy. Project Sunny has a payback period of 4.4 years, while Project Cloudy has a payback period of 3.7 years. The company policy is to accept only projects with a payback period of 4 years and below. [Note that part c is independent of part a and b] Required: Advise La Vie Limited, which project should be undertaken and why.
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
100%
![La VieLimited is considering investing in a new project called Dometircs to
manufacture Boost robotics for kids. The initial capital outlay is $1,200,000 and
is expected to generate cash flows over 5 years, which is detailed as follows:
Year
1
2
3
$
180,000
260,000
360,000
400,000
480,000
4
5
Assuming the required rate of return is 9% and management requires a
payback period of 4 years for all projects.
Required:
(i) Calculate the payback period.
Year Cash Flow Cumulative Cash Flow
$
$
Note: Copy the above table and complete the calculations in the answer
booklet.
(ii) Calculate the net present value.
Year
Cash Flow
Discount Factor at Present Value
(to fill the
discount factor)
$
Note: Copy the above table and complete the calculations in the answer
booklet.
(iii) Advise the management as to whether they should proceed to procure the
new equipment.
(iv) La Vie Limited is presented with Project Sunny and Project Cloudy.
Project Sunny has a payback period of 4.4 years, while Project Cloudy
has a payback period of 3.7 years. The company policy is to accept only
projects with a payback period of 4 years and below.
[Note that part c is independent of part a and b]
Required:
Advise La Vie Limited, which project should be undertaken and why.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcc90cb3e-fff1-4390-ba90-017272465315%2F159c5c2c-0b91-4a9f-bf3c-a4a8eac2483c%2F96yk0ub_processed.png&w=3840&q=75)
Transcribed Image Text:La VieLimited is considering investing in a new project called Dometircs to
manufacture Boost robotics for kids. The initial capital outlay is $1,200,000 and
is expected to generate cash flows over 5 years, which is detailed as follows:
Year
1
2
3
$
180,000
260,000
360,000
400,000
480,000
4
5
Assuming the required rate of return is 9% and management requires a
payback period of 4 years for all projects.
Required:
(i) Calculate the payback period.
Year Cash Flow Cumulative Cash Flow
$
$
Note: Copy the above table and complete the calculations in the answer
booklet.
(ii) Calculate the net present value.
Year
Cash Flow
Discount Factor at Present Value
(to fill the
discount factor)
$
Note: Copy the above table and complete the calculations in the answer
booklet.
(iii) Advise the management as to whether they should proceed to procure the
new equipment.
(iv) La Vie Limited is presented with Project Sunny and Project Cloudy.
Project Sunny has a payback period of 4.4 years, while Project Cloudy
has a payback period of 3.7 years. The company policy is to accept only
projects with a payback period of 4 years and below.
[Note that part c is independent of part a and b]
Required:
Advise La Vie Limited, which project should be undertaken and why.
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