TASK 8 - DATA Goldie clothes are planning to expand their clothing business by opening a factory overseas. The initial investment will be £12,500,000. It is expected to generate net revenues of £6,500,000 each year if the project goes ahead. Additional costs for the project will be £3,000,000 per year. [Cashflows occur at the end of each year] The company’s weighted average cost of capital is 11% and the project will have a lifetime of 5 years. Task 8Goldie clothes are planning to expand their clothing business by opening a factory overseas.The initial investment will be £12,500,000. It is expected to generate net revenues of£6,500,000 each year if the project goes ahead. Additional costs for the project will be£3,000,000 per year. [Cashflows occur at the end of each year]The company's weighted average cost of capital is 11% and the project will have a lifetime of5 years.(a) Calculate the net present value (NPV) of the above proposal showing your workings inan excel spreadsheet including formulas. You should complete your answer on the"Task 8-Data" tab of the "MBF Summative data.xlsx" excel file.(b) Calculate the Payback period of the above proposal in years and months. Round upto the next month.c) Describe two advantages of using the NPV method over the Payback method andconclude whether it is still worth using the Payback technique as part of the investmentappraisal process.

After calculating all working in excel, the Net Present Value (NPV) is £4,35,640. NPV Calculation:…

Answered: Goldie clothes are planning to expand…

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually...

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TASK 8 - DATA

Goldie clothes are planning to expand their clothing business by opening a factory overseas.
The initial investment will be £12,500,000. It is expected to generate net revenues of
£6,500,000 each year if the project goes ahead. Additional costs for the project will be
£3,000,000 per year. [Cashflows occur at the end of each year]
The company’s weighted average cost of capital is 11% and the project will have a lifetime of 5 years.

Task 8
Goldie clothes are planning to expand their clothing business by opening a factory overseas.
The initial investment will be £12,500,000. It is expected to generate net revenues of
£6,500,000 each year if the project goes ahead. Additional costs for the project will be
£3,000,000 per year. [Cashflows occur at the end of each year]
The company's weighted average cost of capital is 11% and the project will have a lifetime of
5 years.
(a) Calculate the net present value (NPV) of the above proposal showing your workings in
an excel spreadsheet including formulas. You should complete your answer on the
"Task 8-Data" tab of the "MBF Summative data.xlsx" excel file.
(b) Calculate the Payback period of the above proposal in years and months. Round up
to the next month.
c) Describe two advantages of using the NPV method over the Payback method and
conclude whether it is still worth using the Payback technique as part of the investment
appraisal process.

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