Rajawali Sdn Bhd has two potential projects with an initial cost of RM1,500,000. The capital budget for the year will only allow the company to accept one of the two projects. Year Project A Project B 1 RM400,000 RM200,000 2 RM400,000 RM400,000 RM400,000 RM600,000 4 RM400,000 RM400,000 5 RM400,000 RM1,000,000 The cost of capital is 11%.
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- A business has £18 million available for capital investment in the current year, but has the following five projects: Project Initial Investment £m NPV £m A 2.5 0.750 B 5.0 2.575 C 10.0 2.350 D 2.5 0.500 E 10.0 0.825 Which projects should the company choose? Projects can be scaled down (divisible) if necessary.As the financial manager of Soloi Ltd, you are required to analyse two proposed capital investments, namely Projects 02AD and 02ZT. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects' expected net profit (loss) are as follows: Year 1 2 3 4 Project 02AD R40 000 R5 000 R5 000 (R15 000) Project 02ZT R10 000 R10 000 R10 000 R10 000 Required: 1. Calculate the payback period for each project. 2. Calculate the net present value for each project. 3. Determine which project should be chosen (Based on 2 above). 4. Calculate the internal rate of return for project 02ZT.Rajawali Sdn Bhd has two potential projects with an initial cost of RM1,500,000. The capital budget for the year will only allow the company to accept one of the two projects. Year Project A Project B 1 RM400,000 RM200,000 2 RM400,000 RM400,000 3 RM400,000 RM600,000 4 RM400,000 RM400,000 RM400,000 RM1,000,000 The cost of capital is 11%. (a) Calculate the following: i. Payback period for both projects. ii. Net present value for both projects.
- Coco Industries has four potential projects with an initial cost of RM2,000,000 each. The capital budget for the year will only allow Coco industries to accept one of the four projects. Given the discount rates and the future cash flows of each project, calculate the NPV and justified which project should they accept. Year Project A Project B Project C Project D 1 500,000 600,000 1,000,000 300,000 2 500,000 600,000 800,000 500,000 3 500,000 600,000 600,000 700,000 4 500,000 600,000 400,000 900,000 5 500,000 600,000 200,000 1,100,000 Discount rate 5% 9% 15% 22%Arenas Enterprise is considering to invest in one of the three projects. The projects are as follows: Project Name Icarus Lazarus Potus Initial Investment RM1.0 million RM1.5 million RM2.5 million Expected Return (%) 14 17 12 The company is planning to finance the project through equity and debt, 40 percent and 60 percent respectively. For the first RM800,000 the after-tax cost of debt would be 9 percent and any additional funds to be raised by debt would incur 10 percent cost. The company has retained earnings of RM900,000 with a required rate of return of 15 percent. The cost of issuing new common stock is 20 percent. a) Construct the weighted marginal cost of capitalU3 Company Is considering three long-term capital investment proposals. Each Investment has a useful llfe of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $169,600 $185,500 $214,000 Annual net income: Year 1 14,840 19,080 28,620 2 14,840 18,020 24,380 3 14,840 16,960 22,260 4 14,840 12,720 13,780 5 14,840 9,540 12,720 Total $74,200 $76,320 $101,760 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) [Use the factor table.] 1) Compute the cash payback period for each project. (Round to two decimals.) 2) Compute the net present value for each project. (Round to nearest dollar.) 3) Compute the annual rate of return for each project. (Round to nearest dollar.)
- Cenderawasih Holdings is evaluating two (2) mutually exclusive projects that require an initial investment of RM50,000. The cash flows for each project are give as follows: Year Project Delima Projek Nilam RM10,000 RM15,000 2. RM20,000 RM15,000 RM26,000 RM15,000 RM25,000 RM15,000 5. RM15,000 RM15,000 Assume the cost of capital is 16 percent. Compute the Net Present Value (NPV) for each investment. 3.The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 В -200 0 400 -100 0 80 80 D -150 60 60 60 60 1. Distinguish between hard and soft capital rationing 2. Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated 3. Discuss the impact on your analysis of each project being indivisibleTropical Candy Inc are considering two mutually-exclusive projects, A and B. Their cash flows are shown below. Both Project A and Project B have an estimated cost of capital of 10%. Cash flows will be realized at the end of each time period. Year, t Project A Cash Flow at time t Project B Cash Flow at time t 0 -1800 -600 1 110 660 2 263.78 72.6 3 133.1 53.24 4 1024.87 146.41 5 3221.02 1610.51 Calculate the NPV for each project. Which, if either, project should be accepted? Why? Are there other capital budgeting criteria? If yes, list at least one.
- U3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $176,000 $192,500 $212,000 Annual net income: Year 1 15,400 19,800 29,700 15,400 18,700 25,300 15,400 17,600 23,100 4 15,400 13,200 14,300 15,400 9,900 13,200 Total $77,000 $79,200 $105,600 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view PV table. (a) Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) years Project Bono years Project Edge years Project ClaytonU3 Company is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows. Project Bono Project Edge Project Clayton Capital investment $164,800 $180,250 $204,000 Annual net income: Year 1 14,420 18,540 27,810 14,420 17.510 23,690 3 14,420 16,480 21,630 14.420 12.360 13,390 5 14,420 9,270 12,360 Total $72,100 $74,160 $98,880 Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 15%. (Assume that cash flows occur evenly throughout the year.) Click here to view the factor table. Compute the cash payback period for each project. (Round answers to 2 decimal places, e.g. 10.50.) Project Bono years Project Edge years Project Clayton years eTextbook and Media Compute the net present value for each project. (Round answers to 0 decimal places, e.g. 125. If the net present value is negative, use either a negative sign preceding the number eg -45 or…The Carlo Company has been allocated RM600,000 on investment projects for the coming year. Four projects, each with a four year life and with the following cash flows are currently being considered: Year 0 1 2 3 4 Project RMk RMk RMk RMk RMk A -300 100 10 200 200 B -200 0 0 0 400 C -100 0 0 80 80 D -150 60 60 60 60 Distinguish between hard and soft capital rationing Assuming that the projects are divisible recommend to the Board, which projects should be accepted using the Net Present Value method and evaluate the total net present value that would be generated Discuss the impact on your analysis of each project being indivisible