Question: A project is estimated to require an initial investment fund of IDR 50,000,000 with an age of 6 years, with a residual value of IDR
A project is estimated to require an initial investment fund of IDR 50,000,000 with an age of 6 years, with a residual value of IDR 4,000,000. The company is estimated to get an income of IDR 8,000,000 in the first year and increases by IDR 1,000,000 each year until the 6th year. By using an interest rate of 10%, then:
a. Decide whether the project is feasible or not (use the NPW method).
b. Make a sensitivity analysis of the investment decision by varying the interest rate in the range of ± 50% of the estimated values above (use calculations of 20% and 50% of the initial interest rate).
c. Determine the limit value of the resulting interest rate parameter the decision on the alternative has changed.
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SOLUTION a To determine whether the project is feasible or not using the net present worth NPW method we need to calculate the present value of the cash inflows and outflows of the project and subtrac... View full answer
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