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
Related questions
Question
calculate the Net present value for all three projects, the WACC (discount factor) is 4.25% pick which project is the best one,
please show all your working out if possible
thankyou and have a nice day :)
Transcribed Image Text:Project summaries (£'000 unless stated otherwise)
The projects all have a limited lifespan and are indivisible. The key figures from the
project proposals are:
Project A
Project B
Project C
Project life (years)
Capital expenditure in to
Residual value
Additional working capital
Annual revenues
Gross profit %
Additional annual fixed costs
200,000
60,000
60,000
300,000
45%
40,000
250,000
70,000
50,000
425,000
42%
70,000
400,000
200,000
100,000
475,000
47%
80,000
Mashaba plc's shares have a par value of £0.20. The loan notes have a market
value equal to their nominal value.
Mashaba plc's policy is to depreciate capital expenditure in equal amounts over the
estimated useful life of the asset. This policy matches the tax regulations that also
state that tax must be paid at the appropriate rate on accounting profits on the last
day of the year in which they are earned.
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