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- God is King Ltd has been printing all its magazines from Dubai due to the
comparative cost advantage. The company is considering establishing its own printing department, and the R&D team has identified a printing machine which will meet the quality and cost specification of God is King Ltd. The machine also has the capacity to print to meet the market needs of the company. The machine, which has a useful life of 5 years, will cost GHS800, 000 and immediate installation cost will be GHS50, 000. Fixed cost for maintaining the machine will be 170,000 per annum over the machines useful life and additional working capital of 30,000 will be introduced in year 2. The use of this machine will generate a contribution of GHS 500,000 per annum for five (5) years. Corporate income tax rate, payable in areas, is 25% and the companies after tax cost of capital is 20%. No capital allowance is permitted. Required: Calculate theNPV for the project and advise management on whether to accept or reject the project.
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- #15 Carni’s boss stated that after reviewing first quarter earnings, the company decided to invest in only one store in the city. After evaluating the performance of the store, the company will determine if it wants to increase its presence in the area. a) If you were Carni, what method of evaluation would you use to recommend a site for a new video store? b) Explain how you would determine which site to invest in.Whitehaven Group Ltd (WHG) is an industrial machinery manufacturing company based in Sydney. Due to increased demand for the company’s products the CEO of WHG, Mr John Johnson, is looking at upgrading the company’s production facilities at Chullora. As the member of the finance department at WHG you have been assigned the task of assessing the acceptability of the new project. • To assist you in this task the finance team have prepared the following information relating to the proposed project:• Implementation of the new project would require an immediate outlay of $10,000,000 on new machinery. This machinery is depreciable for tax purposes.• Additionally, WHG would need to undertake an immediate upgrade of the warehouse used for the project. This upgrade would cost $2,500,000 and is not considered depreciable for tax purposes.• The project is expected to have an operational life of four years.• The project is expected to generate EBDIT (in nominal values) of $5,000,000 in the first…Mastery Problem: Capital Investment Analysis HomeGrown Company HomeGrown Company is a chain of grocery stores that are similar to indoor farmer's markets, providing fresh, local produce, meats, and dairy products to consumers in urban areas. HomeGrown is considering opening several stores in a new city, and has proposals from three contractors (Alpha, Beta, and Gamma companies) who would like to provide buildings for the new stores. The amount of expected revenue from the stores will depend on the design of the contractor. For example, if HomeGrown decides on a more open floor plan, with less shelf space for products, revenue would be lower overall. However, if HomeGrown decides on a very crowded floor plan, it may lose customers who appreciate a more open feel. As the project manager for HomeGrown, you are responsible for deciding which if any of the proposals to accept. HomeGrown's minimum acceptable rate of return is 20%. You receive the following data from the three…
- The Chief Operations Officer (COO) of a manufacturing firm recommends one of the manufacturing sites to undergo a process improvement initiative. He claims that this project will enable the company to realize a net savings of at least $3.25 Mln. The Chief Financial Officer (CFO) of the company tasked you to conduct a financial analysis to verify the claims of the COO. After performing cost analysis, you estimated that the project will require an initial investment of $2 Mln today and $1 Mln in Year 1. Afterwards, the initiative will yield an annual cost savings of $850k from Year 2 to Year 10. You assume that these cost savings are realized at the end of each year. (a) Suppose that you use a discount rate of 5%. Will the resulting net savings support the claim of the COO? (b) Determine the Internal Rate of Return (IRR) of the process improvement initiative. (c) Show the NPV profile of the project.Ajmal LLC a company based in ibri, and its Project management team has recently been completed the sensitivity analysis of their upcoming project at Fahud. The following are the results of the sensitivity analysis. i) Initial investment sensitivity margin is 15%, ii) Sales volume sensitivity margin is 12%, iii) Selling price sensitivity margin is 8%, iv) Variable cost sensitivity margin is 3%, You are required to identify which two of the above variables, the Ajmal LLC management should pay particular attention. a. ii & iii b. I & ii c. None of the options d. i & iv(10) The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine the best average rate of return. Which machine has the best average rate of return? Machine A Machine B Machine C Estimated average annual income $43,540 $72,900 $72,600 Average investment 311,000 243,000 484,000
- Hoosier Corporation is an entertainment company that produces and distributes digital content and operates its own amusement parks. The company is looking into expanding into a new market, Hoosiersville. There are several projects the CEO considers investing in to capture the values brought by the market. One project for consideration is an improvement to the existing amusement park in Hoosierville. If the project gets approved, the company expects an annual sale of $19.6 million from ticket sales, food, and concessions at the park, with an expected growth of 2.5% annually for a project life of 8 years. The annual operating expenses are expected to be 34% of sales, and the working capital (needed immediately) is expected to be 10% of the next year’s sales. The Tax Rate is 21% In addition, the CEO determines that the new park will need to buy a new rollercoaster which will have a $3 million upfront cost. The rollercoaster will be depreciated straight-line for eight years to an…Task 2B: Critically evaluate the hey benefits and limitations of each of the differing investment appraisal techniques, supporting this response with relevant academic research as to whether each of the differing techniques is applied in practice within a real-life business context. Unilever PLC planning to meet the environmental protection strategy including an introduction of the UN approved 120-litre plastic open-top drums, known as the ‘Blue-drum’. It was highlighted in 2022 AGM that Comfort’ one of their products delivered high growth in Latin America, South Asia, and Turkey, but declined in Europe where consumers reduced their spending in the category. Hence, the company is trying to reduce cost in producing plastic containers used for this washing detergent product, ‘Comfort’. Assume that cost of manufacturing a ten-pack of Blue-drum includes direct material at C19, direct labour is 111 and variable overheads at f3. The depreciation of a special equipment is C7 with no…ABC PLC is a highly profitable electronics company that manufactures a range of innovative products for industrial use. Its success is based to a large extent on the ability of the company’s development group to generate new ideas that result in commercially viable products. The latest of these products is just about to undergo some final tests and a decision has to be taken whether or not to proceed with an investment in the facilities required for manufacturing. You have been asked to undertake an evaluation of this investment.The company has already spent £750,000 on the development of this product. The final testing of the product will cost about £40,000. The head of the development group is very confident that the tests will be successful based on the work already undertaken. Another company has already offered Raindeer £1.10 million for the product’s patent and an exclusive right to its manufacture and sale, even though the final tests are still to be completed. This sum being…
- The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best average rate of return. Machine A Machine B Machine C Estimated average income $43,866.76 $73,406.10 $62,231.25 Average investment 313,334.00 244,687.00 414,875.00Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. Project A would redesign the production process to recycle raw materials waste back into the production cycle, saving on direct materials costs and reducing the amount of waste sent to the landfill. Project B would remodel an office building, utilizing solar panels and natural materials to create a more energy-efficient and healthy work environment. Project C would build a new training center in an underserved community, providing jobs and economic security for the local community. Required:1. Assuming the cost of capital is 12%, complete the table below by computing the payback period, NPV, profitability index, and internal rate of return. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate…I need help with FIN-320 module 7 assignement. The scenario is listed below: Financial Option 1: Purchase a $10 Million BuildingRationale for investment: The business is considering environmental, social, and corporate governance(ESG) factors as part of its investment into a new building for its headquarters. The building itself will bea Leadership in Energy and Environmental Design (LEED)-certified building, but the new site beingconsidered currently houses a large, inactive gas station that sold both gasoline and diesel fuel. The newsite also has a sizable repair facility left over that was used for deliveries and tractor-trailer trucks formore than 50 years. While some restoration was performed on the site prior to the new building’sconstruction, the previous owner ran out of funds before they were ever able to bring the site up toLEED standards. Four large fuel tanks remain on the site, and they will also need to be addressed perLEED standards.Assumptions to consider: $10 million…
