I need some pointers for each bullet 1. The Leisure Park Limited is a theme park that offers rollercoasters and attractions. Thecompany is highly geared. It is considering two mutually exclusive projects, each ofwhich is expected to incur an investment of £750,000. Project A is the introduction ofa new high speed vertical drop rollercoaster and Project B, the introduction of a 4Dcinema.Requirement:The management information that would be required to assist them inmaking such a decisionThe means by which the decision should be appraisedThe sources of funding that may be available to the companyAny other considerations and recommendations that you might make tothe directors to assist in this decision

Before accepting any project one should have to analyse the market and most importantly find the Net…

Requirement: The management information that would be required to assist them in making such a decision The means by which the decision should be appraised The sources of funding that may be available to the company Any other considerations and recommendations that you might make to the directors to assist in this decision

Requirement: The management information that would be required to assist them in making such a decision The means by which the decision should be appraised The sources of funding that may be available to the company Any other considerations and recommendations that you might make to the directors to assist in this decision

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Axis Corp. is studying two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $40,000 and generate cash inflows of $20,000 per year for the next 3 years. Project Thompson replaces the existing system; it will cost $285,000 and generate cash inflows of $65,000 per year for 6 years. Using a(n) 9.07% cost of capital, calculate each project's NPV, and make a recommendation based on your findings. The NPV of project Kevin is ____ The NPV of project Thompson is _____ Which project should the company choose?
As a Financial Analyst of Morgan Investments Co., you are going to make a business investment decision on which of the two possible investments the company should undertake. Both projects cost £200,000 with a rate of return of 12%. Below are the cash profits of the two projects: Year Project A Project B Profits (£) 1 36,000 37,300 2 42,000 40,000 3 56,000 56,000 4 44,000 51,000 5 35,000 39,650 6 32,500 42,500 7 66,000 80,000 Question one: Using NPV and IRR methods, appraise the two projects and advise the Financial Directors which of the projects is viable and why. Question two: Which of the methods is superior? Justify your answer.
Barbie Holdings is planning to do an investment of $500,000 in one of the two alternatives projects which located in Auckland. The company’s capital cost is 15% and expected cash flow from both projects are as follows Project A Year 1 = $120,000 Year 2 = $100,000 Year 3 = $130,000 Year 4 = $150,000 Year 5 = $180,000 Project B Year 1 = $150,000 Year 2 = $150,000 Year 3 = $150,000 Year 4 = $150,000 Year 5 = $150,000 Requirements a) calculate i) payback period both projects ii) Net present value both projects iii) internal rate of return for project B b) According to above answer, which project should be selected and why.
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. Project 1 Project 2 Initial investment $(510,000) $(685,000) Cash inflow Year 1 $485,000 $610,000 Compute the following for each project: NPV (net present value) PI (profitability index) IRR (internal rate of return) (The answers have already been computed below for you to answer the following questions) Based on your analysis, answer the following questions Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain. What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain. Should we also use the payback method to assist us in project selection? Why or why not? Explain…
Axis Corp. is studying two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $70,000 and generate cash inflows of $30,000 per year for the next 3 years. Project Thompson replaces the existing system; it will cost $215,000 and generate cash inflows of $50,000 per year for 6 years. Using a(n) 10.39% cost of capital, calculate each project's NPV, and make a recommendation based on your findings.
The management team is considering two hotel projects. Project A will be in Jamaica with an initial investment of $985,000 and Project B will be in Canada with an initial investment of $850,000. Years Project A Project B 1 $350,000.00 $457,000.00 2 $575,000.00 $500,000.00 3 ($53,000.00) ($100,000.00) 4 $880,000.00 $780,000.00 The cost of capital for Project A is 15% and the cost of capital for project B is 13%. Calculate the Discounted Payback Period for Project A
Evans Industries wishes to select the best of three possible machines, each of which is expected to satisfy the firm's ongoing need for additional aluminum-extrusion capacity. The three machines—A, B, and C—are equally risky. The firm plans to use a cost of capital of 11.7% to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the following table. Machine A MachineB Machine C Initial investment 91,900 64,700 100,200 Year Cash inflows 1 11,000 10,200 30,500 2 11,000 19,900 30,500 3 11,000 30,200 30,500 4 11,000 39,500 30,500 5…
Evans Industries wishes to select the best of three possible machines, each of which is expected to satisfy the firm's ongoing need for additional aluminum-extrusion capacity. The three machines—A, B, and C—are equally risky. The firm plans to use a cost of capital of 12.7% to evaluate each of them. The initial investment and annual cash inflows over the life of each machine are shown in the following table. Machine A Machine B Machine C Initial investment 91,500 64,100 100,300 Year Cash inflows 1 12,600 9,200 29,100 2 12,600 19,000 29,100 3 12,600 29,400 29,100 4 12,600 40,200 29,100 5 12,600 - 29,100 6…
Connor Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%. Project 1 Project 2 Initial investment $(684,000) $(585,000) Cash inflow Year 1 $275,000 $380,000 Compute the following: NPV (net present value) PI (profitability index) IRR (internal rate of return) Based on your analysis, answer the following questions: Which is the best choice? Why? Which project should be selected and why? If the projects had the same IRR amounts but different NPV totals, then how would you know which project to select? Explain. What would happen if both projects had negative NPV totals? Which project would you choose? What do negative NPVs indicate? Explain. Should we also use the payback method to assist us in project selection? Why or why not? Explain.
All amounts are in $AUD. In order to satisfy the sharp increase in demand KGN is evaluatinginvesting in a “Mega Warehouse” project in Australia. KGN has already identified two existing warehouses. In order to mitigate the risk and assess the fit for purpose of these facilities KGN asked “Axiom Ltd.” to conduct a technical due diligence. “Axiom Ltd.” is asking $100,000 as a fixed fee for its consulting services. Project A has an initial outlay of dollars $150 million and Project B has an initial outlay of $85 million. Project A will generate additional revenues of 45 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $1million immediately, this working capital will be recovered at the end of the project. Project B will generate additional revenues of 25 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $2million immediately, this working capital…
All amounts are in $AUD. In order to satisfy the sharp increase in demand KGN is evaluatinginvesting in a “Mega Warehouse” project in Australia. KGN has already identified two existing warehouses. In order to mitigate the risk and assess the fit for purpose of these facilities KGN asked “Axiom Ltd.” to conduct a technical due diligence. “Axiom Ltd.” is asking $100,000 as a fixed fee for its consulting services. Project A has an initial outlay of dollars $150 million and Project B has an initial outlay of $85 million. Project A will generate additional revenues of 45 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $1million immediately, this working capital will be recovered at the end of the project. Project B will generate additional revenues of 25 million starting at the end of year 1 until the end of year 10. It will also incur additional working capital expenses of $2million immediately, this working capital…
Axis Corp. is considering investment in the best of two mutually exclusive projects. Project Kelvin involves an overhaul of the existing system; it will cost $45,000 and generate cash inflows of $20,000 per year for the next 3 years. Project Thompson involves replacement of the existing system; it will cost $275,000 and generate cash inflows of $60,000 per year for 6 years. Using an 8% cost of capital, calculate each project’s NPV, and make a recommendation based on your findings.

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