[25] Sunshine Products Pty Ltd is considering buying one of the mutually exclusive projects for increasing...

  

Transcribed Image Text:

[25] Sunshine Products Pty Ltd is considering buying one of the mutually exclusive projects for increasing its production efficiency. The company uses 15% cost of capital. The initial investment and annual cash flows over the life of each project are shown below. Project A 1 170 Year (t) 1 2 3 4 5 6 7 8 Initial Investment (R'000) Project B 780 Project C 990 Cash flows (R'000) Project A Project B 257 425 378 578 498 30 616 Project C 227 227 227 227 227 227 227 227 1. 2. 3. Calculate the NPV for each project over its life. Rank the projects in descending order based on NPV. [7] Use the equivalent annuity (EAC) approach to evaluate and rank the projects in descending order. [7] Use the replacement chain method to evaluate and rank the projects in descending order. [7] [25] Sunshine Products Pty Ltd is considering buying one of the mutually exclusive projects for increasing its production efficiency. The company uses 15% cost of capital. The initial investment and annual cash flows over the life of each project are shown below. Project A 1 170 Year (t) 1 2 3 4 5 6 7 8 Initial Investment (R'000) Project B 780 Project C 990 Cash flows (R'000) Project A Project B 257 425 378 578 498 30 616 Project C 227 227 227 227 227 227 227 227 1. 2. 3. Calculate the NPV for each project over its life. Rank the projects in descending order based on NPV. [7] Use the equivalent annuity (EAC) approach to evaluate and rank the projects in descending order. [7] Use the replacement chain method to evaluate and rank the projects in descending order. [7]

Answer rating: 100% (QA)

To calculate the Net Present Value NPV for each project over its life well use the given cash flows ... View the full answer