Mr Shikongo was presented with the following investment opportunity for his SME enterprise. After-tax inflows of...
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Mr Shikongo was presented with the following investment opportunity for his SME enterprise. After-tax inflows of the project are as follows: year 0 1 Cash flows (750 000) 250 000 N$ 2 200 000 ● 3 270 000 4 260 000 5 150 000 The following criteria are applied by Mr Shikongo's enterprise to assist in investment decision making: Capital investments are to be recovered within four years. A return above the cost of capital of 16% is required when discounted cash flows methods are employed. Required: Calculate the following and indicate whether the project is acceptable according to these method: a) Payback method 5 marks b) Discounted payback method 6 marks c) Net present value (NPV) 6 marks d) Internal rate of return (IRR) e) Modified internal rate of return (MIRR) f) Profitability index (PI) 12 marks 12 marks 3 marks Mr Shikongo was presented with the following investment opportunity for his SME enterprise. After-tax inflows of the project are as follows: year 0 1 Cash flows (750 000) 250 000 N$ 2 200 000 ● 3 270 000 4 260 000 5 150 000 The following criteria are applied by Mr Shikongo's enterprise to assist in investment decision making: Capital investments are to be recovered within four years. A return above the cost of capital of 16% is required when discounted cash flows methods are employed. Required: Calculate the following and indicate whether the project is acceptable according to these method: a) Payback method 5 marks b) Discounted payback method 6 marks c) Net present value (NPV) 6 marks d) Internal rate of return (IRR) e) Modified internal rate of return (MIRR) f) Profitability index (PI) 12 marks 12 marks 3 marks
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a Payback method To calculate the payback period we sum the cash flows until they equal the initial ... View the full answer
Related Book For
Accounting and Finance An Introduction
ISBN: 978-1292088297
8th edition
Authors: Peter Atrill, Eddie McLaney
Posted Date:
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