Question 10

BCD Ltd. is evaluating a renewable energy project with an expected life of 12 years. The initial investment is $4 million, and additional costs of $250,000 will be incurred at the end of the sixth year. The project will generate annual savings of $700,000 in energy costs. The equipment is expected to have a salvage value of $300,000 at the end of the project. The company’s tax rate is 25%, and the discount rate is 8%.

Requirements:

1. Calculate the NPV of the project.
2. Determine the IRR.
3. Compute the payback period.
4. Evaluate the impact of a 20% decrease in annual savings on the NPV.
5. Advise whether to proceed with the project based on the financial metrics.

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Question 1:

You are provided with the following information for Company ABC:

Item	Amount (in $ thousands)
Cash	1,200
Accounts Receivable	3,500
Inventory	4,000
Property, Plant, Equipment	15,000
Total Assets	23,700
Accounts Payable	2,700
Short-Term Debt	1,500
Long-Term Debt	6,000
Common Stock	8,500
Retained Earnings	5,000
Total Liabilities and Equity	23,700

1. Calculate the Current Ratio.
2. Calculate the Quick Ratio.
3. Determine the Debt to Equity Ratio.
4. Calculate the Net Working Capital.