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 57,000 86,000 107,000 140,000 250,000 Cash outflows 48,000 52,000 47,000 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 57,000 86,000 107,000 140,000 250,000 Cash outflows 48,000 52,000 47,000 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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Transcribed Image Text: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 2022
Cash inflows (£) 13,000
2023
2024
2025
2026
2027
57,000
86,000
107,000
140,000
250,000
Cash
outflows 48,000
52,000
47,000
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.
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