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?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 13P

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