John & Kelly Inc, a medium-size listed company raised £1,000,000 from the capital market, aiming to invest in a lucrative project. The Chief Executive Officer (CEO) is currently considering the following three projects, each requires the purchase of equipment. Only one project can be undertaken for investment. Project X Y Z Initial investment £950,000 £900,000 £1,000,000 Useful life 5 years 5 years 5 years Expected scarp value £10,000 £5,000 £20,000 Expected net cash flows £ £ £ End of year 1 350,000 320,000 400,000 2 320,000 290,000 320,000 3 280,000 270,000 280,000 4 250,000 220,000 240,000 5 180,000 200,000 200,000 The CEO asks Sasha Malik, a young and ambitious executive who has recently been appointed to the Chief Financial Officer (CFO) to evaluate these projects and recommend the best project to invest. Sasha considers this appointment as an opportunity to gain experience and enough knowledge before she moves to a Fortune 500 companies in five years. To achieve her ambition, in her report, she recommends project X to invest without providing any credible explanation. The CEO finds the report unusual because she is accustomed to evaluating a project based on the payback period, accounting rate of return, net present value, and internal rate of return. She becomes more suspicious; thus, she appoints an independent analyst to do all the relevant John & Kelly Inc follow straight-line depreciation and tries to maintain a 15% cost of capital. Note: No need to enter currency symbol and comma just type numbers with nearest round off number and percentages (for example: 10000 or 10000.65=10001 or 10.65%=11%) if the answer of payback is 2 years 5.65 month so you have to type 2.6 Calculate NPV for project X Calculate NPV for project Y Calculate NPV for project Z Calculate Simple payback for project X Calculate Simple payback for project Y Calculate Simple payback for project Z Calculate Discounted payback for project X Calculate Discounted payback for project Y Calculate Discounted payback for project Z
John & Kelly Inc, a medium-size listed company raised £1,000,000 from the capital market, aiming to invest in a lucrative project. The Chief Executive Officer (CEO) is currently considering the following three projects, each requires the purchase of equipment. Only one project can be undertaken for investment.
|
|
Project |
||
|
|
X |
Y |
Z |
|
Initial investment |
£950,000 |
£900,000 |
£1,000,000 |
|
Useful life |
5 years |
5 years |
5 years |
|
Expected scarp value |
£10,000 |
£5,000 |
£20,000 |
|
Expected net cash flows |
£ |
£ |
£ |
|
End of year 1 |
350,000 |
320,000 |
400,000 |
|
2 |
320,000 |
290,000 |
320,000 |
|
3 |
280,000 |
270,000 |
280,000 |
|
4 |
250,000 |
220,000 |
240,000 |
|
5 |
180,000 |
200,000 |
200,000 |
The CEO asks Sasha Malik, a young and ambitious executive who has recently been appointed to the Chief Financial Officer (CFO) to evaluate these projects and recommend the best project to invest. Sasha considers this appointment as an opportunity to gain experience and enough knowledge before she moves to a Fortune 500 companies in five years. To achieve her ambition, in her report, she recommends project X to invest without providing any credible explanation. The CEO finds the report unusual because she is accustomed to evaluating a project based on the payback period, accounting
Note: No need to enter currency symbol and comma just type numbers with nearest round off number and percentages (for example: 10000 or 10000.65=10001 or 10.65%=11%)
if the answer of payback is 2 years 5.65 month so you have to type 2.6
Calculate NPV for project X
Calculate NPV for project Y
Calculate NPV for project Z
Calculate Simple payback for project X
Calculate Simple payback for project Y
Calculate Simple payback for project Z
Calculate Discounted payback for project X
Calculate Discounted payback for project Y
Calculate Discounted payback for project Z
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