Murdoch Pty Ltd is considering three mutually exclusive projects. The initial cash outflow and after-tax cash inflows associated with each project are show in the following table: Cash Flows Project X ($) Project Y ($) Project Z ($) Initial Cash Outflow Cash Inflows Years 1-5 50,000 100.000 115,000 27.000 41,000 43.000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming, that the company has a cost of capital equal to 13% C) Calculate IRR for each project. D) Summarise the preferences dictated by each measure, and indicate which project you would recommend. Explain why.
Murdoch Pty Ltd is considering three
mutually exclusive projects. The initial
outflow
associated with each project are show in
the following table:
Cash Flows
Project
X ($)
Project
Y ($)
Project
Z ($)
Initial Cash
Outflow
Cash Inflows
Years 1-5
50,000
100.000
115,000
27.000
41,000
43.000
A) Calculate the payback period for each period
B) Calculate the NPV of each project assuming,
that the company has a cost of capital equal to
13%
C) Calculate IRR for each project.
D) Summarise the preferences dictated by each
measure, and indicate which project you would
recommend. Explain why.
2. Whale Wash Limited issued eleven-year bonds
one year ago at a coupon rate of 7.5%. The
bonds have a face value of $150.000 and make
semi-annual payments. It the YTM on the bonds
is 8.6% p.al, what is the current
3. Why does the value of a share depend on a
dividend?
4. Perth Limited has just paid an annual dividend
per share of $0.75. The firm expects that
dividends will grow at a rate of 8% pa for the next
three years, before settling down to a growth rate
of 5% pa forever. The firm's required
return
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