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ABC Ltd. is considering an investment which would require the immediate purchase of a capital asset costing €400,000 and
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- Kumi Ltd is considering an investment in a project, which requires an immediate payment of GHS15,000, followed by a further investment of GHS5,400 at the end of the first year. The subsequent return phase net cash inflows are expected to arise at the end of the following years: Year 1 2 3 4 5 Cash inflow (GHS) 6,500 7,750 5,750 4,750 3,750 You are required to estimate the internal rate of return of this project assuming the company’s cost of capital is 16%.Timber Plc have identified a 5-year capital investment project and are preparing a schedule of cash flows for the project to identify whether they should proceed with investment. If the project goes ahead, the company will raise a 5-year loan of €5 million to finance the project with an annual interest rate of 10%. How should the cash flows on the loan be treated in the schedule of project cash flows? Include interest cash flows in times 1 to 5 and repayment of loan principal at time 5. Include receipt of €5m at time 0, interest for times 1 to 5, and repayment at time 5. Do not include cash flows on the loan as they are a sunk cost Do not include cash flows on the loan as they are included in the cost of capitalKolyma Ltd. is investing £15,000 in a new project. The net cash inflows from the project are expected to be £2,000 in year 1, £3,500 in year 2, £7,500 in year 3, and £10,000 in year 4. Kolyma Ltd.'s cost of capital is 3%. Assuming the initial investment arises immediately and all subsequent cash flows arise at the end of the year, what is the net present value of this project? O £6,712 £7,423 O £5,989 O £7,176
- Company A is evaluating two investment projects: Project X and Project Y. The initial investment for Project X is £20,000, and it is expected to generate net cash flows of £10,000 per year for 3 years. Project B requires an initial investment of £40,000 and is expected to generate net cash flows of £15,000 per year for 4 years. Calculate the profitability index (PI) for each project and advise which project the company should choose if the PI is the primary investment decision criterion. Use a discount rate of 8%.A company is considering the purchase of a new piece of equipment for P900,000. Predicted annual cash inflows from this investment are P360,000 (year 1), P300,000 (year 2), P180,000 (year 3), P150,000 (year 4) and P60,000 (year 5). The payback period is:Happy Holiday Sdn. Bhd. (HHSB) has hired you to perform a feasibility study of a new project of integrated concept of Homestay that requires a RM5, 500,000 initial investment. HHSB expects a total annual operating cash flow of RM968,000 for the next 10 years. The relevant discount rate is 10 percent. Cash flows occur at year end. Required: i) calculate the Net Present Value (NPV) of the homestay. ii) assuming after one year, the estimate of the remaining annual cash flows will be revised either upward to RM1, 925,000 or downward to RM319,000. Each revision has an equal probability of occurring. At that time, the project can be sold for RM1,430,000. Calculate the revised NPV given that the company can abandon the project after one year.
- ABC Ltd is considering undertaking a project, which will involve an initial outlay ofRs.3,00,000. The project has the following cash flows associated with it:‘000Year 1 cash inflows 100Year 2 cash inflows 150Year 3 cash inflows 200If a discount rate of 10% is used to calculate the NPV of the project, which of the followingstatements is correct? (Assume the cash flows arise at the end of each year.)A. The project will yield a positive NPV of Rs. 65.5k and have a payback period of 2 yearsand 3 monthsB. The project will yield a positive NPV of Rs. 65.5k and have a payback period of 2 yearsand 9 monthsC. The project will yield a positive NPV of Rs. 365.5k and have a payback period of 2 yearsand 3 monthsD. The project will yield a positive NPV of Rs. 365.5k and have a payback period of 2 yearsand 9 monthsAn investment of P350,000 is made to be followed by payments of P200,000 each year for 3 years. What is the annual rate of return on investment for the project? Please include cash flow diagram.What will be the equivalent uniform annual amount that will be deposited in a bank for 15 years that will be replaced the capitalized cost of a project with the following cost; The initial cost is P2,000,000 and an additional cost of P500,000 at the end of every 5 years. The annual operating costs are P100,000 at the end of every year for the first 6 years and P160, 000 thereafter. In addition, there is expected to be a major repair work cost of P300, 000 every 13 yrs. Assume i =15%.
- Bluefield Inc. is considering a project that will require an initial investment of $20,000 and is expected to generate future cash flows of $5,000 for years 1 through 3 and $2,500 for years 4 through 6. The project’s payback period is: A. 6 years B. 5 years C. 4 years D. 67 yearsSchinhorn Inc. is investing £500,000 in a new project. The project will last four years. The net cash inflows from the project are expected to be £75,000 in year 1, £200,000 in year 2, £300,000 in year 3, and £350,000 in year 4. Assuming cash flows arise evenly through the year, what is the payback period of this investment? O 3 years O 3 years 6 months O 3 years 3 months O 2 years 9 monthsLENLEN Company is considering on investing in new automated machinery. The machinery will be used for five years in the project. (Prevailing cost of capital at 10% per annum) The new investment needs a P1,700,000 cash outflow. The estimated cash inflow of income from the investment of machinery for the next five (5) years would be: CASH INFLOWS YEAR 1 P 950,000 750,000 650,000 350,000 150,000 REQUIRED: By applying the following evaluation techniques if the investment economically acceptable. Show your complete solution and Answer it if acceptable or not acceptable from 1 to 4 below: 3. Net Present Value 4. Profitability Index
