The joint venture that Sam and Danni are considering has the forecast cash outflows and inflows as shown in Table 15.10.

Danni and Sam have agreed that a discount rate of 15% would be required from this project.
Required:

a) Calculate the NPV for the bottles project.

b) Estimate the project’s IRR using trial and error.

c) Advise Danni and Sam on whether they should consider proceeding further with this project. Would your advice be different if they required a return of 20%?

Transcribed Image Text:

Table 15.10 The bottles project Time At start '000 Cost of moulding machines, less grant 1,300 After one year Cash inflow from bottle sales 360 After two years Cash inflow from bottle sales 550 After three years Cash inflow from bottle sales 710 After four years Cash inflow from bottle sales 340 After four years Scrap value of machines 100