Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels Housing £ (m) £ (m) (200) (250) 0 Capital outlay 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: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and 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) (200) (250) 0 Capital outlay 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: (a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc's Board of Directors accordingly

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 7P: Your division is considering two investment projects, each of which requires an up-front expenditure...

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Your division is considering two investment projects, each of which requires an up-front expenditure of 15 million. You estimate that the investments will produce the following net cash flows: a. What are the two projects net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects IRRs at these same costs of capital?
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Wonder Plc is considering two investment projects in another city and the estimated cash flows are as follows: Year Hotels £(m) Housing £ (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: a) Assess the viability of these two projects using NPV and Payback period as the appraisal techniques and advise Wonder Plc’s Board of Directors accordingly. b) Explain the importance of Payback period to the CEO.
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 flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required: Assess the viability of these two projects using NPV and Payback period as the appraisal techniques…
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 flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required:Assess the viability of these two projects using NPV and Payback period as the appraisal techniques…
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