You are the newly recruited Finance Officer of FYG Pharmaceutical Ltd, a household pharmaceutical enterprise based in
Question:
You are the newly recruited Finance Officer of FYG Pharmaceutical Ltd, a household pharmaceutical enterprise based in Kumasi. You ascertained that, FYG Pharmaceutical Ltd is considering investing GHC5,175,000.00 in a COVID-19 related vaccine project that is expected to yield an average return of 6.67% on investment for four years. At the end of this period the project shall be liquidated for a value determined as 25% of initial investment. FYG Pharmaceutical Ltd's weighted average cost of capital (WACC) is 10%.
Required:
a) With the aid of memo, you are required to submit for the attention of the Finance Director your estimation of the present value of FYG Pharmaceutical Ltd's cash flow expectations at the end of the fourth year.
b) In your memo, suggest three (3) potential sources of finance for this project. You are to include your possible recommendation(s) together with reasons.
c) Differentiate between capital market and primary market.
Expert Answer:
Answer to Part a Present Value Cash flows discounted at WACC ie 5175000 667 PVAF 10 4 5175000 25 PVI... View the full answer
