Pillage Mining is considering which mutually exclusive projects it should undertake, as it has only 600 million
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Question:
- Pillage Mining is considering which mutually exclusive projects it should undertake, as it has only £600 million to spend. The firm is presented with three different alternatives, each of which requires an initial investment as shown below.
- The company anticipates a cost of capital of 12%, and the net after tax cash flows of the projects are as follows (£mm): (you can use excel, but show calculations)
- Calculate the NPV and payback period of each project. Show all workings.
Year | Project X | Project Y | Project Z |
0 | (200) | (160) | (155) |
1 | 25 | 90 | 50 |
2 | 75 | 45 | 40 |
3 | 65 | 35 | 45 |
4 | 70 | 35 | 45 |
5 | 65 | 25 | 35 |
- Recommend, with reasons, which projects you would undertake, if any. Show all workings.
Which project has the highest IRR and why? Show all workings.
Related Book For
Financial Management for Decision Makers
ISBN: 978-0138011604
2nd Canadian edition
Authors: Peter Atrill, Paul Hurley
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