(c) Company AC Ltd contemplates to raise debt finance totaling Sh.1,000,000. It will berequired to pay an annual interest of 15%. The money can be invested in one of thefollowing projects A or B which will generate the following cash inflows;PeriodProject AProject Bvif.12345200,000500,0002150,000400,000300,000300,000400,000300,0005500,000150,000You are required payback period method, Net present value method and task method.Advice the management which project to invest in and why.[20 marks]

To solve this problem, we need to evaluate the two projects (A and B) using three methods:Payback…

Answered: (c) Company AC Ltd contemplates to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Following is information on two alternative investments being considered by Jolee Company. The company requires a 8% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Project A $(171,325) Project B $(159,960) Initial investment Expected net cash flows in: 35,000 59,000 55,000 Year 1 54,000 45,000 87,295 81,400 65,000 Year 2 Year 3 73,000 20,000 Year 4 Year 5 a. For each alternative project compute the net present value. b. For each alternative project compute the profitability index. If the company can only select one project, which should it choose? Complete this question by entering your answers in the tabs below. Required A Required B For each alternative project compute the net present value.
Vishu
D1. Account
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years. The present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and 15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this investment is a. 12% b. 3% c. 10% d. 9%
Please aware the questions a
he discount rate is 5%. Your Corporation is considering an investment project that will require an initial investment of $9,400 and will generate the following net cash inflows in each of the three years of the project: Year 1 Year 2 Year 3 Cash inflows.......... $4,000 $2,000 $4,000 Cash outflows $0 $0 $1,500 What is the net present value for this investment project
Based on the information below, calculate the adjusted present value (APV), given that the project lifespan is 1 year and is being financed by 30% debt: Investment at t=0 € 33,000 Cashflow after yr1 € 39,600 Cost of capital (COC) 53% Cost of debt 43% Tax 33% a) The adjusted present value (APV) is: €-4325.31 b) The adjusted present value (APV) is: €-5307.69 c) The adjusted present value (APV) is: €-7117.65 d) The adjusted present value (APV) is: €-6135.26
Below is information about cash flow of Project A undertaken by ZEE Limited. Required rate of return for such type of project is 15%. Years 0 1 2 3 4 5 Cash Flow in Rs. (500,000) 150,000 200,000 170,000 190,000 250,000 Calculate payback period and Net present value (NPV).
Please show calcualtons, (Excel or long hand): 13) Develop a cash flow worksheet based on the following information, initial investment = 500,000, 5-year property, variable costs = 54%, fixed costs 70,000 per year, sales yr 1 = 300,000 yr 2 = 500,000, yr 3 = 750,000, yr 4 = 550,000, yr 5 = 250,000 tax rate = 21%
What is the MIRR for the project using a 12% Cost of Capital? Show in a timeline format. Year Cash Flow in $ 0 ($1000) 1 400 2 400 3 600
project which equires initial 3. A con party. вах а outlay of £600.000 and working capital of K180 000. The project net cash inflows are k 200.000 at it is projected current price levels. At the end of 5 years, it is that the project will have a terminal valice of K50 000 and that the elimination of working capital will provide inflow equal to its initial book value. the per year an compamps post tax cost of capital in 14%. in normind Hermo (money teme) and the inflation rate is projected to be 5%. per annum. the equipment will be subjected to tax depreciation allowances of 25% per anmum on reducing balance basis which can be claimed can be claimed against taxable profits from the current year, which is shortly to end The rate of corporate tax is 35% payable in arrears year Required: Determine whether or not the NPV of the project will justify the investment.
A company manager is faced with an investment proposal of Rp. 100,000,000, - with a period of 4 years and cash inflows every year as follows: Year 1 Rp. 40,000,000 Year 2 Rp. 30,000,000 Year 3 Rp. 30,000,000 Year 4 Rp. 20,000,000 Requested: a. With an interest rate of 12%, with the NPV and PI method, assist the manager in making decisions. Whether the project is accepted or rejected. b. If it is known that the second interest rate is 20% and the cost of capital offered is 17%, calculate the IRR, and make a decision whether to accept or reject the project.

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