Question -NPV and IRR Tia Company Ltd is considering a new product line to augment its range line. It is anticipated that the new product line will involve cash investment of GHS 650,000 in year zero and GHS 850,000 in year one (1). The after-tax inflows of GHS 250,000 are expected in year two (2) and increases by 15% per year thereafter. The product lif span is 10 years and the cost of capital is 10 percent. Required Advice management of Tia Ltd b
Question -NPV and IRR Tia Company Ltd is considering a new product line to augment its range line. It is anticipated that the new product line will involve cash investment of GHS 650,000 in year zero and GHS 850,000 in year one (1). The after-tax inflows of GHS 250,000 are expected in year two (2) and increases by 15% per year thereafter. The product lif span is 10 years and the cost of capital is 10 percent. Required Advice management of Tia Ltd b
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
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Transcribed Image Text:Question -NPV and IRR
Tia Company Ltd is considering a new product line to augment its range line. It is anticipated that
the new product line will involve cash investment of GHS 650,000 in year zero and GHS 850,000
in year one (1). The after-tax inflows of GHS 250,000 are expected in year two (2) and increases
by 15% per year thereafter. The product lif span is 10 years and the cost of capital is 10 percent.
Required
Advice management of Tia Ltd b
Year
2014
2015
You are required to calculate:
Sales (GHe) Profit (GHC)
150,000 20,000
170,000
25,000
() P/V Ratio
(0) B.E.P.
(ii) The sales required to earn a profit of GHz 40,000
(iv) Profit when sales are GH¢ 250,000
(v) Margin of safety at a profit of GH¢ 50,000
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