Kyros Plc is a multinational construction company. The company would like to invest in a project to increase the capacity of production in one of its factories. The project has an initial cost of £10,000,000. The project is expected to last for 6 years and will generate the following cash flow. Period                        Cash flow 1                                7,500,000 2                                7,500,000 3                              15,000,000 4                               22,500,000 5                               22,500,000 6                                 4,500,000 The cost of capital is set at 10%. Required: (a) You have been asked by the financial director to calculate the net present value (NPV) of the project using a schedule of future cash flows. Comment on your findings.  (b) Calculate the payback period for this project and comment on your findings (c) Base on your calculations provide a brief report recommending if Kyros Plc should embark on this project and why

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Kyros Plc is a multinational construction company. The company would like to invest in a project to increase the capacity of production in one of its factories. The project has an initial cost of £10,000,000. The project is expected to last for 6 years and will generate the following cash flow.


Period                        Cash flow
1                                7,500,000
2                                7,500,000
3                              15,000,000
4                               22,500,000
5                               22,500,000
6                                 4,500,000


The cost of capital is set at 10%.


Required:
(a) You have been asked by the financial director to calculate the net present value (NPV) of the project using a schedule of future cash flows. Comment on your findings. 
(b) Calculate the payback period for this project and comment on your findings
(c) Base on your calculations provide a brief report recommending if Kyros Plc should embark on this project and why

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