Division X is currently generating a ROI of 12%. It is considering anew project. This requires an investment of Kes 1.4 million and is expected to yield net cash inflows of Kes 460,000 per annum for the next four years. None of the initial investment will be recoverable at the end of the project. The company has a cost of capital of 8%. Annual accounting profits are to be assumed to equal annual net cash inflows less depreciation, and tax is to be ignored.

Required: 

i. Calculate and comment on the NPV of the project. 

ii. Calculate and comment on the ROI and RI of the project. 

Answer rating: 100% (QA)

i To calculate the NPV of the project we need to discount the net cash inflows at the companys cost of capital The NPV represents the present value of ... View the full answer