You are the Financial Manager of Camber Ltd and have been tasked with evaluating the following...

 

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You are the Financial Manager of Camber Ltd and have been tasked with evaluating the following investment opportunities. The three investment appraisal techniques which are to be used are as follows: Payback Net Present Value (NPV) Internal Rate of Return (IRR) The company's Weighted Average Cost of Capital (WACC) is 14%. Investment Investment B Investment A Initial Outlay 200 M 160 M C 190 M End of Year 1 Return 40 M 80 M 70 M End of Year 2 Return 55 M 70 M 70 M End of Year 3 Return 77 M 65 M 70 M End of Year 4 Return 90 M 50 M 70 M Discount Factors: Year 14% 30% 0 1 1 1 0.877 0.769 2 0.769 0.592 3. 0.675 0.455 4. 0.592 0.35 REQUIREMENT: (a) Calculate the Payback Period for each of the three investment opportunities (6 marks) (b) Calculate the Net Present Value for each of the three investment opportunities. (6 marks) (c) Calculate the Internal Rate of Return for each of the three investment opportunities. (6 marks) (d) Critically analyse the results from (a) to (c) above. (7 marks) Total (25 marks) You are the Financial Manager of Camber Ltd and have been tasked with evaluating the following investment opportunities. The three investment appraisal techniques which are to be used are as follows: Payback Net Present Value (NPV) Internal Rate of Return (IRR) The company's Weighted Average Cost of Capital (WACC) is 14%. Investment Investment B Investment A Initial Outlay 200 M 160 M C 190 M End of Year 1 Return 40 M 80 M 70 M End of Year 2 Return 55 M 70 M 70 M End of Year 3 Return 77 M 65 M 70 M End of Year 4 Return 90 M 50 M 70 M Discount Factors: Year 14% 30% 0 1 1 1 0.877 0.769 2 0.769 0.592 3. 0.675 0.455 4. 0.592 0.35 REQUIREMENT: (a) Calculate the Payback Period for each of the three investment opportunities (6 marks) (b) Calculate the Net Present Value for each of the three investment opportunities. (6 marks) (c) Calculate the Internal Rate of Return for each of the three investment opportunities. (6 marks) (d) Critically analyse the results from (a) to (c) above. (7 marks) Total (25 marks)