Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answer.
Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answer.
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
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 11P: REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old...
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Transcribed Image Text:Problem 3. Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would
require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10-
year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase
the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% ANSWER
P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per
bond with interest payable semi-annually for ten years. The company is subject to 32% income tax.
Determine the Cost of Capital (k)
PROBLEM 4
Solution:
Problem 4. Refer to problem no. 3. Using NPV and IRR method, give your recommendation if the company ONLY
should push the project or not. Explain your answer.
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