Answered: investment

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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The UniMAP Holdings Group is considering investing RM10.0 million in a new shopping complex in Kangar, Perlis. The group has estimated that the shopping complex once built, will contribute RM1,250,000 per year for 10 years. The board of trustees of the group require that any new investment to be undertaken by the group should generate a required rate of return (MARR) of at least 12% per year of its investment. Assuming that at the end of 10 years period the shopping complex will retain about 60% of its initial investment as a salvage value. What should be the decision of the group on this proposed asset investment?

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A company is reviewing an investment proposal in a project involving a capital outlay of GHS9,000,000 in plant and machinery. The project would have a life of 5 years at the end of whichthe plant and machinery could fetch a resale value of GHS 3,000,000. Further, the project would also need a working capital of GHS 1,250,000 which would be built during the year 1, increaseby 5% every year and to be released at the end of the project. The project is expected to yield thefollowing cash profits:Year12345Cash Profit (GHSm) 3.53.02.52.02.0A 25% deprecation for plant and machinery is allowed as income tax exemption on reducingbalance basis. Assume that the corporate tax is paid in the same year to which it relates and every year’s deprecation allowance will be claimed against the same year. The assistant finance manager has calculated the NPV of the project using the company’scorporate target of 20% pre-tax rate of return and has ignored the taxation effects in thecashflows. As the newly…
A company is considering a small project that requires an immediate investment of £120,000. Net income from the project is expected to be £20,000 per annum received continuously over the next twelve years. (a)Calculate the net present value of the investment at an effective rate of interest of 7% per annum. (b)Calculate the discounted payback period for the project at an effective rate of interest of 7% per annum.

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