QUESTION 1 [41 MARKS] ABC Holdings is considering two projects. The projects are similar in nature and are expected to both operate for four years. Due to unavailability of funds to undertake both of them, only one project can be accepted. The cost of capital is 12%. The following information is available: Net cash flows Project A Project B N$000 N$000 Initial investment 46 000 46 000 Year 1 17 000 15 000 Year 2 14 000 13 000 Year 3 24 000 15 000 Year 4 9 000 25 000 Estimated scrap value at the end of year 4 4 000 4 000 Depreciation is charged on the straight line basis. REQUIREMENT MARK Subtotal Total a) Calculate the following for both proposals: i) The payback period (round off your answer to one decimal place) 2 2 ii) The net present value (NPV) 4 6 iii) The return on investment (ROI) 8 14 iv) The residual income (RI) 4 18 v) If the two projects are mutually exclusive, which project should be chosen and why?

b) Determine the sensitivity of project A to a change in cost of capital

c) Determine the sensitivity of project B to a change in initial investment d) Assuming that the management of ABC holdings have decided to undertake both projects and the projects can be undertaken in part, how much NPV will they get if they have N$80 000 000 available to invest.

e) Explain three non-financial considerations that should be taken into account before a project is chosen.

please help

assiONVENT 2 QUESTION 41 ABC Holdng coraidering wa peojects The projects ore simr in ratre nd are pected tor bth apara for four eors. Dan to unalabity of fands to undetake both of tham, only an ojec cn be acceed The co of p is 12% The tolowing aon a a Netcash flows Project A Pact NS00 Inital inveaiant 4000 4 0 00 Yar 15 000 Yar 2 4000 13 000 Yer 3 24 000 15 000 ar4 Extrated scrap alue the cnd of por 4 4000 4000 epre is chaged on te sright e bos RK Subiatal Total REQUIREMENT Calcult the following far bath propana 0 The paak pered und on your orseer one deorel paces The net prasent valan NP The retum an invesnt RO The residual incame R 15 vthe ho projees a mtly exoive, wch propec oud be dose and wty? Decemine te seeavy o projec A to a change in cos o cap ge 34f3t Deemine the serstvity of propeet to a chinge in i 30 M g n ne roragemeto AChong ee deded to wndeake bon ps and the proeas can be undetaken in pat how much NPV wil they pet they ave NS0000 000availble to Explain thnan-inancial conaideratars that should be taken acce bone a peoject chnen 45 ine assiONVENT 2 QUESTION 41 ABC Holdng coraidering wa peojects The projects ore simr in ratre nd are pected tor bth apara for four eors. Dan to unalabity of fands to undetake both of tham, only an ojec cn be acceed The co of p is 12% The tolowing aon a a Netcash flows Project A Pact NS00 Inital inveaiant 4000 4 0 00 Yar 15 000 Yar 2 4000 13 000 Yer 3 24 000 15 000 ar4 Extrated scrap alue the cnd of por 4 4000 4000 epre is chaged on te sright e bos RK Subiatal Total REQUIREMENT Calcult the following far bath propana 0 The paak pered und on your orseer one deorel paces The net prasent valan NP The retum an invesnt RO The residual incame R 15 vthe ho projees a mtly exoive, wch propec oud be dose and wty? Decemine te seeavy o projec A to a change in cos o cap ge 34f3t Deemine the serstvity of propeet to a chinge in i 30 M g n ne roragemeto AChong ee deded to wndeake bon ps and the proeas can be undetaken in pat how much NPV wil they pet they ave NS0000 000availble to Explain thnan-inancial conaideratars that should be taken acce bone a peoject chnen 45 ine