Kyros Plc is a multinational construction company. The company would like to invest in a project to increase the capacity of production in one of its factories. The project has an initial cost of £10,000,000. The project is expected to last for 6 years and will generate the following cash flow. Period Cash flow 1 7,500,000 2 7,500,000 3 15,000,000 4 22,500,000 5 22,500,000 6 4,500,000 The cost of capital is set at 10%. Required: (a) You have been asked by the financial director to calculate the net present value (NPV) of the project using a schedule of future cash flows. Comment on your findings. (b) Calculate the payback period for this project and comment on your findings (c) Base on your calculations provide a brief report recommending if Kyros Plc should embark on this project and why

Kyros Plc is a multinational construction company. The company would like to invest in a project to increase the capacity of production in one of its factories. The project has an initial cost of £10,000,000. The project is expected to last for 6 years and will generate the following cash flow. Period Cash flow 1 7,500,000 2 7,500,000 3 15,000,000 4 22,500,000 5 22,500,000 6 4,500,000 The cost of capital is set at 10%. Required: (a) You have been asked by the financial director to calculate the net present value (NPV) of the project using a schedule of future cash flows. Comment on your findings. (b) Calculate the payback period for this project and comment on your findings (c) Base on your calculations provide a brief report recommending if Kyros Plc should embark on this project and why

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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