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
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
(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
Step by step
Solved in 4 steps