ii. At the end of year 4, the company will incur costs of 0.2m cleaning up...

Transcribed Image Text:

ii. At the end of year 4, the company will incur costs of £0.2m cleaning up the site. iii. Chipping plc intends to allocate head office costs of £0.2m per year to the project. These costs have not been included above and will be incurred whether or not the project is undertaken. The company has a cost of capital of 10%. Ignore taxation. Required: (a) Calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) for the above project stating if the project should be undertaken or not giving reasons for your choice. (15 marks) b) Compare and contrast NPV and IRR as investment appraisal methods, include in your comparison which method you consider to be the best one to use for investment appraisal. ii. At the end of year 4, the company will incur costs of £0.2m cleaning up the site. iii. Chipping plc intends to allocate head office costs of £0.2m per year to the project. These costs have not been included above and will be incurred whether or not the project is undertaken. The company has a cost of capital of 10%. Ignore taxation. Required: (a) Calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) for the above project stating if the project should be undertaken or not giving reasons for your choice. (15 marks) b) Compare and contrast NPV and IRR as investment appraisal methods, include in your comparison which method you consider to be the best one to use for investment appraisal.

Answer rating: 100% (QA)

a calculation of NPV NPV 2 calculation of Net Incremental cash Inflows and NPV particulars Years Amo... View the full answer