a) Make That Money Limited (MTM) is assessing the viability of two investment opportunities in Latin...

 

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a) Make That Money Limited (MTM) is assessing the viability of two investment opportunities in Latin America. The first project is in the retail industry and requires an initial outlay of US $115,000. The second project is in the business process outsourcing (BPO) sector and requires an initial capital outlay of US $140,000. The cost of capital for both projects is 7% and the cash inflows for each project are detailed in the table below. Year Retail BPO US $ US $ 49,000 56,000 46,000 39,000 0 34,000 35,000 24,000 36,500 Calculate each project's Payback period (4 marks) 11) Assuming that the projects are mutually exclusive, which project(s) would you recommend according to the Payback period? Why would you make this recommendation? (2 marks) Calculate each project's Net Present Value (NPV). (6 Marks) Assuming that the projects are independent, which project(s) would you recommend according to the NPV? Why would you make this recommendation? (2 Marks) Calculate each project's Discounted Payback Period. (6 Marks) 1) 123 4 LO a) Make That Money Limited (MTM) is assessing the viability of two investment opportunities in Latin America. The first project is in the retail industry and requires an initial outlay of US $115,000. The second project is in the business process outsourcing (BPO) sector and requires an initial capital outlay of US $140,000. The cost of capital for both projects is 7% and the cash inflows for each project are detailed in the table below. Year Retail BPO US $ US $ 49,000 56,000 46,000 39,000 0 34,000 35,000 24,000 36,500 Calculate each project's Payback period (4 marks) 11) Assuming that the projects are mutually exclusive, which project(s) would you recommend according to the Payback period? Why would you make this recommendation? (2 marks) Calculate each project's Net Present Value (NPV). (6 Marks) Assuming that the projects are independent, which project(s) would you recommend according to the NPV? Why would you make this recommendation? (2 Marks) Calculate each project's Discounted Payback Period. (6 Marks) 1) 123 4 LO

Answer rating: 100% (QA)

ANSWER Years Retail Retail C CF BPO BPO C CF 0 115000 115000 140000 140000 1 49000 66000 56000 84000 ... View the full answer