Question 1.Ultimate Ltd. a sausage producing company, intending to undertake a new project in 2021,required £280,000 of initial investment. The cost of capital for this project is estimated at 12%per annum.A consultant of Ultimate Ltd. has come up with the following cash flow projections:Cashflows/Years 2022Cash inflows (£) 13,0002023202420252026202757,00086,000107,000140,000250,000Cashoutflows 48,00052,00047,00058,00058,00072,000(£)As the Finance Director of YY Ltd., you are required to:a) Appraise the proposed project using the Net Present Value (NPV) techniqueb) Advice management on the financial viability of the projectc) Advice managem ent on any other factors that need consideration.

Net Present Value : The Net Present Value is the net of Present value of net cash inflow and Present…

Ultimate Ltd. a sausage producing company, intending to undertake a new project in 2021, required £280,000 of initial investment. The cost of capital for this project is estimated at 12% per annum. A consultant of Ultimate Ltd. has come up with the following cash flow projections: Cashflows/Years 2022 Cash inflows (£) 13,000 2023 2024 2025 2026 2027 86,000 47,000 57,000 107,000 140,000 250,000 Cash outflows 48,000 52,000 58,000 58,000 72,000 (£) As the Finance Director of YY Ltd., you are required to: a) Appraise the proposed project using the Net Present Value (NPV) technique b) Advice management on the financial viability of the project c) Advice management on any other factors that need consideration.

Ultimate Ltd. a sausage producing company, intending to undertake a new project in 2021, required £280,000 of initial investment. The cost of capital for this project is estimated at 12% per annum. A consultant of Ultimate Ltd. has come up with the following cash flow projections: Cashflows/Years 2022 Cash inflows (£) 13,000 2023 2024 2025 2026 2027 86,000 47,000 57,000 107,000 140,000 250,000 Cash outflows 48,000 52,000 58,000 58,000 72,000 (£) As the Finance Director of YY Ltd., you are required to: a) Appraise the proposed project using the Net Present Value (NPV) technique b) Advice management on the financial viability of the project c) Advice management on any other factors that need consideration.

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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You are considering investing in a project which will last four years. You will invest £500,000 at the beginning of the project and in return get an annual cash-flow of £200,000. The company has calculated that the cost of capital will be 9%. The discount rate of 9% gives the following Discount Factors (DF): Year 0 1.000 Year 1 0.917 Year 2 0.841 Year 3 0.772 Year 4 0.708 What is the Net Present Value (rounded up)? OA. £700,000 OB. £800,000 OC. £148,000 OD. £300,000
Advance Inc. is considering investing £10 million on a project. It is expected that the project willgenerate annual cash inflows of 1.5 million in perpetuity. The corporate’s opportunity cost of capitalfor this project is 12%.a) Demonstrate the net present value (NPV) approach to evaluate whether to invest in thisproject.b) Demonstrate the internal rate of return (IRR) approach to evaluate whether to invest in thisproject.c) Which approach should be adopted when NPV and IRR generates conflicting results, andwhy?
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Siemens AG invests €80,000,000 to build a manufacturing plant to build wind turbines. The company predicts net cash flows of €16,000,000 per year for the next 8 years. Assume the company requires an 8% rate of return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your present value factor to 4 decimals.) (1) What is the payback period of this investment? (2) What is the net present value of this investment? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the net present value of this investment? (Any losses or outflows should be entered with a minus sign.) Chart Values are Based on: Cash Flow Annual cash flow Select Chart Drenant value of noch inflown Present Value of 1 Future Value of 1 n= i = 91,945,600 91,945,600 80,000,000 11,945,600
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Phoenix Company is considering investments in projects C1 and C2. Both require an initial investment of $330,000 and would yield the following annual net cash flows. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net cash flows Project C1 Project C2 Year 1 $ 46,000 $ 130,000 Year 2 142,000 130,000 Year 3 202,000 130,000 Totals $ 390,000 $ 390,000 a. The company requires a 8% return from its investments. Compute net present values using factors from Table B.1 in Appendix B to determine which projects, if any, should be accepted.b. Using the answer from part a, is the internal rate of return higher or lower than 8% for (i) Project C1 and (ii) Project C2? Hint: It is not necessary to compute IRR to answer this question.
1. Google, Inc., uses a maximum payback period of 6 years and currently must choose between two mutually exclusively projects. Project Alpha requires an initial outlay of BD 24000; project Beta requires an initial outlay of BD44000. Using the expected cash inflows given for each project in the following table. Expected cash flow Year Project Alpha Project Beta 1 BD6000 BD19000 2 BD9000 BD6000 3 BD4000 BD4000 4 BD6000 BD13000 5 BD3500 BD5000 6 BD2000 BD4000 Required: 1. Determine the payback period of each project 2. Because they are mutually exclusive, Google must choose one. Which should the company invest in? 3. Explain why one of the projects is the better choice than the other
Lin-ay sang Subay is considering a P600,000 investment in a new equipment that is anticipated to produce the following net cash inflows: Year 1, P125,000; Year P245,000; Year 3, P185,000; Year 4, P105,000 and Year 5, P240,000. If the cash flows occur throughout the year, what is the equipment discounted payback period assuming cost of capital of 9% p.a.?
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Raisons Reels Pty Ltd is considering investing in the purchase of new equipment The equipment will cost $350 000 There will be net cash inflows in each of the three years of: Year 1: $140 000, Year 2: $160 000 and Year 3: $122 000 The equipment is thought to have a residual value of $60 000 at the end of year 3 The required rate of return (RRR) is 14% 4.The Accounting Rate of Return (ARR) for this investment is: 5. Which of the following statements is true regarding the decision rule for ARR? 6. A qualitative feature of investments is:

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