In order to increase its market penetration and boost profitability, Coles Group (COL) is evaluating investing in
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Question:
a) Calculate the FCFs for this project.
b) What is the NPV for the project?
c) What is the Discounted Payback Period?
d) What is the IRR?
e) Assume that the risk of investing in the MACS is higher than the overall risk of the company, what would happen to the discount rate and consequently NPV of the project? Why?
f) Suppose that COL' management discounted payback rule is 5 years. Based on your analysis in b), c) and d) should the company undertake this project? Justify your answer with reference to theory. What other factor might affect the final decision?
Related Book For
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
7th edition
Authors: Hilton Murray, Herauf Darrell
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