Question: PLEASE ONLY ANSWER PART D imitless Ltd. is planning to buy a new warehouse to store its production output. The nvestment would require 500,000 to
PLEASE ONLY ANSWER PART D
imitless Ltd. is planning to buy a new warehouse to store its production output. The nvestment would require 500,000 to be paid upfront. Thanks to the new warehouse, he company expects to increase its profits by 120,000 annually for the next five years, ind then 60,000 for the following five years. A. Caleulate the Net Present Value (NPV) of this investment opportunity if the cost of eapital is 12%. [3 marks] B. Should timittess Ltd. go ahead with the purchase of the new warehouse? Explain your reasoning. [3 marks] C. What is the payback period of this investment? [3 marks] D. Suppose the Internal Rate of Return (IRR) of this investment opportunity is 15%. Based on this information alone, should Limitless Ltd. make the investment? Why? Would this decision be consistent with that from B? Explain your reasoning. [5 marks]
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