ICE (Week 12, Lesson 123 Winter 2024 HRMNTO1-4 Launa Vaughan A. MODERNIZATION CASE(10 Marks) Management is contemplating investing $1.5 million to modernize a plant and theywould like to get a 20% internal rate of return. Should they go ahead with the decision? Theeconomic life of the project is estimated at 10 years. The savings (or cash inflows) are estimated at$300,000 per year. The cost of capital is 14%. Required:Calculate the Net Present Value of theproject? (2 marks) What is the approximate IRR of the project? (2 marks) What is the payback of theproject? (1 mark)Should management go ahead with the project? Why or why not? (2 marks) Whatfactors, if they changed, would impact your decision? (3 marks)

Given:Initial Investment (I) = $1.5 millionCash Inflows (CF) per year = $300,000Cost of Capital (r)…

Answered: ICE (Week 12, Lesson 123 Winter 2024…

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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