Question: Hi There Can you please help me with this ! 15 Gumede (Pty) Ltd has the opportunity to invest in a project with the following
Hi There Can you please help me with this !
15
Gumede (Pty) Ltd has the opportunity to invest in a project with the following estimated future cash flows:
Year
1 R300 000
2 R360 000
3 R460 000
4 R380 000
5 R240 000
The cost of the project is R900 000. The companys required rate of return (cost of capital) is 10%. The project has a zero residual value. Ignore taxation.
You are required to:
Determine the following for the project:
a) Net present value. (15)
b) Gumede (Pty) LTD have decided to open a subsidiary in Kuala Lumpur in Malaysia called Grand Hyatt with the following cash flows in US$ (15)
| Year | Cash flows |
| 0 | (190 000) |
| 1 | 56 000 |
| 2 | 54 000 |
| 3 | 45 000 |
| 4 | 25 000 |
| 5 | 35 000 |
| 6 | 15 000 |
| 7 | 12 500 |
| 8 | 17 500 |
b) Calculate the internal rate of return of the Grand Hyatt project (10)
Please Clearly show all your relevant yearly cashflows.
a)
| Cash flow | PV Factor | Present Value | |
| Cost of Investment | 1 | ||
| Year 1 | 0.9091 | ||
| Year 2 | 0.8264 | ||
| Year 3 | 0.7513 | ||
| Year 4 | 0.6830 | ||
| Year 5 | 0.6209 | ||
| Net Present Value |
b)
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