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- Calculate the:Net Present Value (NPV) of the investment and comment on the viability of the investment project. The annual incremental profits/ (losses) relating to the investment are estimated as follows: Years CF’s (000) Year 0 -175,000 Year 1 K11,000 Year 2 K3,000 Year 3 K34,000 Year 4 K47,000 Year 5 K8,000 Investment at the start of the project would be K175, 000,000.the investment sum assuming nil disposal value after five years, would be written off using the equal instalment method. The depreciation has been included in the profit estimates above, which should be assumed to arise at each year end. Assume the cost of Capital is 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 D.f 1.00 0.893 0.797 0.712 0.636 0.567Consider the following project-balance profiles for proposed investment projects, where the project-balance figures are rounded to the nearest dollar: (a) Compute the net present worth of each investment.(b) Determine the project balance at the end of period 2 for Project C ifA2 = $500.(c) Determine the cash flows for each project.(d) Identify the net future worth of each project.The expected cash flows of a project are as follows. Year Cash Flow -100000, 20,000 ,30,000 40,000 ,50,000 30,000 calculate the modified internal rate of return and payback period
- Daymore plc is currently considering three investment opportunities. The following is the details of the investments:-Project A:-1. initial outlay $80m2. Future net inflows Year 1: $190mYear 2: $10mProject B:-1. initial outlay $140m2. Future net inflows Year 1: $180mYear 2: $120mProject C:-1. initial outlay $90m2. Future net inflows Year 1: $10mYear 2: $220mThe company has a capital budget that is restricted in the year of the investment and it will not be possible to undertake all three projects in full. The investment opportunities are independent of one another and each project is divisible (that is, it is possible to undertake part of an investment and to receive a pro-rata return). The cost of capital of the company is 12% and the company uses the net present value method of investment appraisal.Required:Calculate and determine the ranking of the three investment opportunities? (The ranking for the first choice, second choice, and third choice is 1, 2, and 3 respectively). Show…Consider the following project-balance profiles for proposed investment projects: Now consider the following statements:Statement 1: For Project A, the cash flow at the end of year 2 is $100.Statement 2: The future value of Project C is $0.Statement 3: The interest rate used in the Project B balance calculationsis 25%.Which of the preceding statements is (are) correct?(a) Just statement 1.(b) Just statement 2.(c) Just statement 3.(d) All of them.Which of the following comes closest to the net present value (NPV) of a project whose initial investment is $5 and which produces two cash flows: the first at the end of year 2 of $3 and the second at the end of year 4 of $7? The required rate of return is 13%? Select one: a. $1.84 b. $0 c. $1.64 d. $2.05 e. $2.26
- *** By using the following table format, calculate: (a) Calculate the, the Payback Period, and the net Present Value of for each project. Calculation of Payback Period for each project: CUMULATIVE CASH FLOWS Project A Project B Project C £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Payback Period (years and months) Calculation of Net Present Value for each project: Discount Factors Project A Project B Project C CF DCF CF DCF CF DCF £ £ £ £ £ £ Year 1 Year 2 Year 3 Year 4 Year 5 Total DCF Initial investment Net present value b) For each of the above methods of project appraisal recommend which project should be taken up. c) Using all the information gathered from the above techniques which…Consider a project with the following cash flows: End of Year (n) Cash Flows ($)0 -$22,4001 4,5002 12,6703 14,7804 13,6505 11,4406 7,800(a) At an interest rate of 18%, what is the discounted payback period?(b) What is the discounted payback period if the interest rate is 0%?What is the net present value of a project with the following cash flows if the required rate of return is 12 percent? YEAR CASH FLOW 0 -42,398 1 13,407 2 21,219 3 17,800
- Determine the B/C ratio for the following project.First Cost = P100, 000Project life, years = 5Salvage value = P10, 000Annual benefits = P60, 000Annual O and M = P22, 000Interest rate= 15%Consider the following two mutually exclusive projects: YEAR CASH FLOW (A) CASH FLOW (B)0 -$300,000 -$39,0001 20,000 18,0002 70,000 12,0003 80,000 18,0004 400,000 19,000 Whichever project you choose, if any, you require a 15 percent return on your investment.i) If you apply the payback period (PBP) criterion, which investment will you choose? Why?ii) If you apply the net present value (NPV) criterion, which investment will you choose? Why?iii) If you apply the profitability index (PI) criterion, which investment will you choose? Why?iv) If you apply the internal rate of return (IRR) criterion, which investment will you choose?Why?v) Based on your answers in (i) through (iv), which project will you finally…When evaluating the following project, if the required return is 10 percent, what is its NPV? Year Project A ($1,200) 1 125 2. 250 3. 400 4 1000 O $100.57 $98.32 $103.79 O $99.22
