Inzaghi Ltd is evaluating a capital expenditure proposal that has the following forecast cash flows: Original...

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Inzaghi Ltd is evaluating a capital expenditure proposal that has the following forecast cash flows: Original investment £45,000 Cash flow: Year 1 Year 2e £17,500 £25,000 £15,000 Year 3 Scrap Value Discount rate 14% Requiremente a) Compute the net present value of the investment. 10 Marks b) Compute the proposal's internal rate of return and payback period. 10 Markse c) Compare and contrast the advantages and disadvantages of the net present value, the internal rate of return and the payback period as methods for investment appraisal. Should Inzaghi Ltd accept the capital expenditure proposal? Clearly explain your reasons. Inzaghi Ltd is evaluating a capital expenditure proposal that has the following forecast cash flows: Original investment £45,000 Cash flow: Year 1 Year 2e £17,500 £25,000 £15,000 Year 3 Scrap Value Discount rate 14% Requiremente a) Compute the net present value of the investment. 10 Marks b) Compute the proposal's internal rate of return and payback period. 10 Markse c) Compare and contrast the advantages and disadvantages of the net present value, the internal rate of return and the payback period as methods for investment appraisal. Should Inzaghi Ltd accept the capital expenditure proposal? Clearly explain your reasons.

Answer rating: 100% (QA)

Solution a Npv calculation Year 0 year 1 year 2 year 3 Investment 45000 17500 25000 15000 Discount f... View the full answer