A manufacturing company based in Nairobi is considering the following three proj for implementation. Project A,...
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A manufacturing company based in Nairobi is considering the following three proj for implementation. Project A, B and C. Project B and C are mutually exclusive. following estimates have been provided. 1 2 4 Estimated New Cash Inflows in Sh'000 Project B 6,500 3,000 3,000 1,000 Project A 4,500 4,500 4,500 4,500 Project C 3,500 3,500 3,500 3,500 The estimated initial capital outlay for each project is as shown below:- Required: (i) (ii) The project are in the same risk class and therefore can be appraised used 12% discounting rate. Project A B C (iv) Amount (Sh'Million 10 10 10 (a) (b) (c) Briefly explain the term mutually exclusive. Which projects should the company implement based on; Net Present Value (NPV) Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR) (2 marks) (6 marks) (6 marks) (4 marks) (iii) Compute the reinvestment rate for project A, B and C based on IRR and NPV reinvestment rate assumptions. Compute the rate that will force the NPV of B to be equal to that of C. What is (6 marks) this rate? A manufacturing company based in Nairobi is considering the following three proj for implementation. Project A, B and C. Project B and C are mutually exclusive. following estimates have been provided. 1 2 4 Estimated New Cash Inflows in Sh'000 Project B 6,500 3,000 3,000 1,000 Project A 4,500 4,500 4,500 4,500 Project C 3,500 3,500 3,500 3,500 The estimated initial capital outlay for each project is as shown below:- Required: (i) (ii) The project are in the same risk class and therefore can be appraised used 12% discounting rate. Project A B C (iv) Amount (Sh'Million 10 10 10 (a) (b) (c) Briefly explain the term mutually exclusive. Which projects should the company implement based on; Net Present Value (NPV) Internal Rate of Return (IRR) Modified Internal Rate of Return (MIRR) (2 marks) (6 marks) (6 marks) (4 marks) (iii) Compute the reinvestment rate for project A, B and C based on IRR and NPV reinvestment rate assumptions. Compute the rate that will force the NPV of B to be equal to that of C. What is (6 marks) this rate?
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i Briefly explain the term mutually exclusive Mutually exclusive projects are projects that cannot be implemented simultaneouslyIf one project is sele... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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