The finance director of a limited company is considering a number of investment projects in theleisure sector to expand the business.Name or ProjectInitial outlayProfit stream£1.2m£400k at the end of each yearfor 4 yearsA£10kLoss of £1k per year for 2years, followed by profit of£30k per year for 2 yearsВ£1.0m£600k at the end of each yearfor 3 yearsAt the end of each year (for 3years) there is a 50% chanceof a £500k profit and a 50%chance of a £100k lossD£0.4m(You may assume that all profits and losses are made at the end of the year in question. You donot need to consider part years)Your investment advisor says he believes project D has a net present value of £0 when takinga discount rate of 20%. Describe how you think your investment advisor may be treating theuncertainty in the cashflows.

Net Present Project (NPV) is one of the method of capital budgeting. It is the difference present…

Answered: The finance director of a limited…

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

Section: Chapter Questions

Problem 1PS

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ABC Ltd. is considering an investment which would require the immediate purchase of a capital asset costing €400,000 and working capital of €120,000. Net inflows will be €180,000, €160,000 and €140,000 for year one, year two and year three. Working capital will increase by 20% per year in each of the first two years. All of the working capital will be turned into cash at the end of year three. The company’s cost of capital is 15%. The NPV of the investment (ignoring taxation), to the nearest whole number, is:
please give a written explanation
- calculate the minimum payback period - calculate the NVP of the projected cash flow - calculate the internal rate of return (IRR) Expansion Project Title Project Description and Details Project Cost (Initial Investment) First-Year Cash Flow Annual Growth Rate (5 years) Expenses as a percentage of Revenues Payback Period NPV IRR Purchase of Snapple Beverage Company This would be a total acquisition of Snapple Beverage Company. This company manufactures a line of ice teas of various flavors and has a reputation for using the best materials on Earth for making their drinks. It is an established company, with owners looking to retire. They are willing to provide part-time consulting for up to one year to anyone who buys the company. $25,000,000 $8,500,000 8% 28% Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Year 5 Cash Flow Projected Revenues at an annual growth rate Projected Expenses at 28% of Revenue…
please write out the explanation
The finance director of a limited company is considering a number of investment projects in the leisure sector to expand the business. Name or Project Initial outlay Profit stream A £1.2m £400k at the end of each year for 4 years Loss of £1k per year for 2 years, followed by profit of £30k per year for 2 years £10k | £1.0m | £600k at the end of each year for 3 years At the end of each year (for 3 years) there is a 50% chance of a £500k profit and a 50% chance of a £100k loss £0.4m (You may assume that all profits and losses are made at the end of the year in question. You do not need to consider part years) i) Without doing any detailed calculations but giving your reasons, state which of the above projects would be expected to have the greatest IRR (internal rate of return). i) Calculate the IRR (to the nearest whole percentage) for the project you have chosen in part i) explaining how you have estimated your initial approximation. ii) Performing any calculations you need state which…
Example: Evaluating a business investment opportunity • A low-risk, 4-year investment opportunity promises to pay $3,000, $6,000, and $5,000 at the end of the first, second and fourth year, respectively. A cash injection of $1,000 is required at the end of the third year. The investment may be purchased for $10,000, which would have to be borrowed at an effective interest rate of 10%. Use Economic Value Added principle to determine whether the investment should be undertaken.
1. An investor who recently returned from overseas has decided to invest in a venture which has been proposed by a leading investment company.The investor is expected to receive ten (10) sum payments of $5000 at the end of each year for ten times (10) years. However payment increased on by 5% on the second , 10% on the fourth , 15% on the sixth , 20% on the eighth and 25% on the tenth payment . Calculate the sum that should be paid to him now at an interest of 5 % . 2. An office complex measuring 203m^3 has been offered for sale. The cost of replacing the assets and depreciation is estimated $1200m^2 and 10% respectively. I. Calculate the market value price. II. If an extension of 52m^2 has been made to the office complex to be used as residential facility , calculate the capital value of the residential facility at a rate of 900m^2 depression of 4% III.if land comparable land value is assessed at $30000,calculate the value of the subject property.
It is estimated that a certain piece of equipment can save as $25,000 per year in labour and materials. The equipment has an expected life of six years and no market value. If the company must earn a 20% annual return on such investments, select the appropriate cash flow diagram that represents this transaction. O A. O B. P= ? A = $25,000 P= ? A= $25,000 1 2 3 4 End of Year 5 6 2 3 4 End of Year Oc. O D. A= $25,000 A = $25,000 ! 3 End of Year 5 6 1 2. 3 6 End of Year P=? P=? Lütfen birini seçin: O A. C О В. В O C. A O D. D
Giggins Limited is planning to expand its business. The expansion will cost £350,000 initially to purchase new premises and a further £150,000 to purchase equipment. Net cash inflows from the next seven years ofthe project are as follows:Year Net cash inflows1 60,0002 80,0003 130,0004 150,0005 175,0006 250,0007 275,000In which year would Giggins' investment be fully recovered?
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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