Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m) 0 Capital outlay (200) (250) Net cash flows 1 130 130 2 60 120 3 80 120 4 100 80 4 Residual value 20 40 The company’s cost of capital is 15%. Required: Assess the viability of these two projects using NPV and Payback period as the appraisal techniques showing all calculations using formuland advise Wonder Plc’s Board of Directors accordingly.
Wonder Plc is considering two investment projects in another city and the
estimated cash flows are as follows:
Year Hotels Housing
£ (m) £ (m)
0 Capital outlay (200) (250)
Net cash flows
1 130 130
2 60 120
3 80 120
4 100 80
4 Residual value 20 40
The company’s cost of capital is 15%.
Required: Assess the viability of these two projects using
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