Project 1. Riccarton plc is considering five project proposals. They are summarised below: Initial Annual Investment(£000) Revenue(£000) Annual Fixed Costs(£000) Life of Project(Year) A 10 20 5 3 B 30 30 10 5 C 15 18 6 4 Ꭰ E 12 18 17 8 10 8 2 15 Variable costs are 40 per cent of annual revenue. Projects D and E are mutually exclusive. Each project can only be undertaken once and each is divisible. Assume: - The cash flows are confined to within the lifetime of each project The cost of capital is 10 per cent. No inflation No tax All cash flows occur on anniversary dates. If the firm has a limit of £40,000 for investment in projects at Time 0, what is the maximum net present value obtainable?
Project 1. Riccarton plc is considering five project proposals. They are summarised below: Initial Annual Investment(£000) Revenue(£000) Annual Fixed Costs(£000) Life of Project(Year) A 10 20 5 3 B 30 30 10 5 C 15 18 6 4 Ꭰ E 12 18 17 8 10 8 2 15 Variable costs are 40 per cent of annual revenue. Projects D and E are mutually exclusive. Each project can only be undertaken once and each is divisible. Assume: - The cash flows are confined to within the lifetime of each project The cost of capital is 10 per cent. No inflation No tax All cash flows occur on anniversary dates. If the firm has a limit of £40,000 for investment in projects at Time 0, what is the maximum net present value obtainable?
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
Transcribed Image Text:Project
1. Riccarton plc is considering five project proposals. They are summarised below:
Initial
Annual
Investment(£000) Revenue(£000)
Annual Fixed
Costs(£000)
Life of
Project(Year)
A
10
20
5
3
B
30
30
10
5
C
15
18
6
4
Ꭰ
E
12
18
17
8
10
8
2
15
Variable costs are 40 per cent of annual revenue. Projects D and E are mutually exclusive. Each
project can only be undertaken once and each is divisible.
Assume:
-
The cash flows are confined to within the lifetime of each project
The cost of capital is 10 per cent.
No inflation
No tax
All cash flows occur on anniversary dates.
If the firm has a limit of £40,000 for investment in projects at Time 0, what is the maximum net
present value obtainable?
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education