a. ROICO Ltd is considering a project costing N470,000 on capital equipment and N280,000 on working capital. The profits for the project would be as follows: Year Sales Variable Cost Contribution N Fixed costs Profit N N N N 1 200,000 550,000 250,000 300,000 2 600,000 300,000 90,000 210,000 3 280,000 140,000 90,000 50,000 4 300,000 200,000 70,000 130,000 Fixed cost include an annual charge of 110,000 for depreciation at the end of four years the capital equipment sold for 160,000 and recover 62.6% of working capital. The cost of capital is 12%. Required Calculate the NPV and IRR 750,000 900,000 420,000 500,000

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
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Question 2
a. ROICO Ltd is considering a project costing N470,000 on capital equipment and N280,000 on
working capital. The profits for the project would be as follows:
Year Sales
Variable Cost
Contribution
N
N
1
750,000
2 900,000
3
420,000
4
500,000
Fixed costs Profit
N
N
N
200,000
550,000
250,000
300,000
600,000
300,000
90,000
210,000
280,000
140,000
90,000
50,000
300,000
200,000
70,000
130,000
Fixed cost include an annual charge of 110,000 for depreciation at the end of four years the capital
equipment sold for 160,000 and recover 62.6 % of working capital. The cost of capital is 12%.
Required
Calculate the NPV and IRR
on firm's performance
Transcribed Image Text:Question 2 a. ROICO Ltd is considering a project costing N470,000 on capital equipment and N280,000 on working capital. The profits for the project would be as follows: Year Sales Variable Cost Contribution N N 1 750,000 2 900,000 3 420,000 4 500,000 Fixed costs Profit N N N 200,000 550,000 250,000 300,000 600,000 300,000 90,000 210,000 280,000 140,000 90,000 50,000 300,000 200,000 70,000 130,000 Fixed cost include an annual charge of 110,000 for depreciation at the end of four years the capital equipment sold for 160,000 and recover 62.6 % of working capital. The cost of capital is 12%. Required Calculate the NPV and IRR on firm's performance
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