QUESTION 2 (18 marks) 2.a. Trinidad Distribution Company is considering two projects, Hibiscus and Ibis. Project...
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QUESTION 2 (18 marks) 2.a. Trinidad Distribution Company is considering two projects, Hibiscus and Ibis. Project Hibiscus requires an investment from the company of $500,000 and is expected to yield an income stream of $50,000, $250,000 and $350,000. Project Ibis requires a lower investment of S75,000. The revenue streams are $15,000, $25,000, $50,000, $50,000 and finally $150,000. Both projects could be very lucrative and rewarding. However, the financial controller has stated that the company can only invest in one of these projects. Assume that a required rate of return for your company is 20% and that inflation is currently expected to remain steady at 3% for the life of the project. The Project Management Office is responsible for evaluating and recommending the project feasibility to the CEO. Prepare a brief report to submit to the CEO with your recommendation. QUESTION 2 (18 marks) 2.a. Trinidad Distribution Company is considering two projects, Hibiscus and Ibis. Project Hibiscus requires an investment from the company of $500,000 and is expected to yield an income stream of $50,000, $250,000 and $350,000. Project Ibis requires a lower investment of S75,000. The revenue streams are $15,000, $25,000, $50,000, $50,000 and finally $150,000. Both projects could be very lucrative and rewarding. However, the financial controller has stated that the company can only invest in one of these projects. Assume that a required rate of return for your company is 20% and that inflation is currently expected to remain steady at 3% for the life of the project. The Project Management Office is responsible for evaluating and recommending the project feasibility to the CEO. Prepare a brief report to submit to the CEO with your recommendation.
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Related Book For
Managerial Economics Theory Applications and Cases
ISBN: 978-0393912777
8th edition
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
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