The directors of CEE Limited are currently considering two mutually exclusive investment projects - Status Quo and High Both projects are concerned with the purchase of new plant. The following data are available for each project. Status Qou High Tech Initial Cash flow 600,000 750,000 Year 1 120,000 185,000 2 145,000 185,000 3 170,000 185,000 4 190,000 185,000 5 220,000 185,000 6 240,000 185,000 7 - 185,000 8 - 185,000 The business has an estimated cost of capital of 15%. The business has sufficient funds to meet all capital expenditure requirements. Required: Calculate the payback period Calculate the net present value The approximate internal rate of return.
The directors of CEE Limited are currently considering two mutually exclusive investment projects - Status Quo and High Both projects are concerned with the purchase of new plant. The following data are available for each project. Status Qou High Tech Initial Cash flow 600,000 750,000 Year 1 120,000 185,000 2 145,000 185,000 3 170,000 185,000 4 190,000 185,000 5 220,000 185,000 6 240,000 185,000 7 - 185,000 8 - 185,000 The business has an estimated cost of capital of 15%. The business has sufficient funds to meet all capital expenditure requirements. Required: Calculate the payback period Calculate the net present value The approximate internal rate of return.
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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- The directors of CEE Limited are currently considering two mutually exclusive investment projects - Status Quo and High Both projects are concerned with the purchase of new plant. The following data are available for each project.
|
|
Status Qou |
High Tech |
|
Initial Cash flow |
600,000 |
750,000 |
|
Year |
|
|
|
1 |
120,000 |
185,000 |
|
2 |
145,000 |
185,000 |
|
3 |
170,000 |
185,000 |
|
4 |
190,000 |
185,000 |
|
5 |
220,000 |
185,000 |
|
6 |
240,000 |
185,000 |
|
7 |
- |
185,000 |
|
8 |
- |
185,000 |
The business has an estimated cost of capital of 15%. The business has sufficient funds to meet all capital expenditure requirements.
Required:
- Calculate the payback period
- Calculate the
net present value - The approximate
internal rate of return .
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