The X123 Company's expansion plan has been very fruitful in the past few years The return...

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The X123 Company's expansion plan has been very fruitful in the past few years The return to shareholders has been averaging 8%. The Board of Directors believe the 8% growth rate would continue in future. X123 requires a cutoff payback of 3 years as an initial screen when selecting capital investment projects. The following 2 projects are under assessment for investment in the coming year. Cash flows from each of the project appear in the following table: Initial investment Project 1: plant Project 2: new product Launch expansion ($ 300,000) Cash inflows ($ 300,000) Required a b. C. d. Year-1 Year-2 Year-3 Year-4 Year-5 Year -6 $ 90,000 $90,000 $90,000 $ 90,000 $90,000 $ 90,000 $150,000 $120,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 Calculate payback period for each project. (6 Marks) Calculate NPV for each project (10 Marks) Recommend which project X123 should invest in with justifications for your recommendation (4 Marks) Discuss the weaknesses of the IRR and NPV as a method if investment analysis (5 Marks) Question No:05: Describe the stages in the Financial Planning Process and discuss the advantages of a process driven approach to investment decision making (7 marks) a. Discuss the theory of Efficient Markets with specific reference to its applicability in investment decision making. (7 marks) b. Discuss the issues surrounding the PE based value of investment valuation. (8 marks) The X123 Company's expansion plan has been very fruitful in the past few years The return to shareholders has been averaging 8%. The Board of Directors believe the 8% growth rate would continue in future. X123 requires a cutoff payback of 3 years as an initial screen when selecting capital investment projects. The following 2 projects are under assessment for investment in the coming year. Cash flows from each of the project appear in the following table: Initial investment Project 1: plant Project 2: new product Launch expansion ($ 300,000) Cash inflows ($ 300,000) Required a b. C. d. Year-1 Year-2 Year-3 Year-4 Year-5 Year -6 $ 90,000 $90,000 $90,000 $ 90,000 $90,000 $ 90,000 $150,000 $120,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 Calculate payback period for each project. (6 Marks) Calculate NPV for each project (10 Marks) Recommend which project X123 should invest in with justifications for your recommendation (4 Marks) Discuss the weaknesses of the IRR and NPV as a method if investment analysis (5 Marks) Question No:05: Describe the stages in the Financial Planning Process and discuss the advantages of a process driven approach to investment decision making (7 marks) a. Discuss the theory of Efficient Markets with specific reference to its applicability in investment decision making. (7 marks) b. Discuss the issues surrounding the PE based value of investment valuation. (8 marks)

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