Question: Get the answer in less than an hour and get a high rating Swiss Chocolate Company is considering investing in some wrapping machinery. The following
Get the answer in less than an hour and get a high rating
Swiss Chocolate Company is considering investing in some wrapping machinery. The following information has been prepared to support the projects: (20 marks)
The initial cost of each project is BD 3,000. The desired rate of interest is 3%.
| Inflows Years | Project A (BD) | Project B (BD) |
| Inflows Year 1 | 1,500 | 500 |
| Inflows Year 2 | 1,000 | 1,000 |
| Inflows Year 3 | 900 | 300 |
| Inflows Year 4 | 800 | 700 |
| Inflows Year 5 | 500 | 300 |
4.3.1 Calculate the present value factor (discounted rate) for 5 years @3%.
| Year | PV factor @ 3% +1/(1+r)^n |
| 1 | 0.9708 |
| 2 | 0.9426 |
| 3 | 0.9151 |
| 4 | 0.8885 |
| 5 | 0.8626 |
4.3.2 Calculate the NPV of each project. (14 marks)
| Present value | Project A (BD) | Project B (BD) |
| Inflows Year 1 |
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| Inflows Year 2 |
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| Inflows Year 3 |
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| Inflows Year 4 |
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| Inflows Year 5 |
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| Total present value |
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| NPV |
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4.3.3 Suggest to the business the suitable project based on NPV technique. (3.5 marks)
| Your suggestion and reason:
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