td is considering investing in a project which has the following cash flows:   £000 Initial investment  2,900 Cash flows:   Year 1  800 Year 2  1,000 Year 3  1,200 Year 4  800 Year 5  500   The cost of capital is 8%   Extracts from NPV (DCF)tables:

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
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Kapka Ltd is considering investing in a project which has the following cash flows:

 

£000

Initial investment 

2,900

Cash flows:

 

Year 1 

800

Year 2 

1,000

Year 3 

1,200

Year 4 

800

Year 5 

500

 

The cost of capital is 8%  

Extracts from NPV (DCF)tables: 

Rate of discount 

8% 

9% 

10%

Year 0 

1.000 

1.000 

1.000

Year 1 

.926 

.917 

.909

Year 2 

.857 

.842 

.826

Year 3 

.794 

.772 

.751

Year 4 

.735 

.708 

.683

Year 5 

.681 

.650 

.621

Year 6 

.630 

.596 

.564



TASKS 

  1. a) Calculate the payback period (in years and months). 
  2. b) Calculate the ARR (accounting rate of return). 

 

  1. c) Calculate the NPV (net present value). 
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