You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows:YearCash Flow (£)0-30,000,00018,000,00028,000,00038,000,00048,000,00058,000,000614,000,000The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance. Calculate the Internal Rate of Return (IRR)of this project. Record it step by step from beginning till the end result using the IRR formulas, but not formulas on excel.

Based on the cash flow we will discount the cash flow using the discount rates to find out the net…

Answered: You are a banker to Livingstone…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 4CE: Manzer Enterprises is considering two independent investments: A new automated materials handling...

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You are a banker to Livingstone Thompson Limited, a textile manufacturing company. Livingstone Thompson Ltd. is planning to establish a new factory overseas. Livingstone Thompson Ltd. have told you that the factory will run for six years and then be sold to a local entity. The Finance Department of Livingstone Thompson Ltd. has estimated the following yearly cash flows:

*Year*	*Cash Flow (£)*
0	-30,000,000
1	8,000,000
2	8,000,000
3	8,000,000
4	8,000,000
5	8,000,000
6	14,000,000

The Financial Manager of Livingstone Thompson Ltd. has decided that the company’s cost of capital of 15% is an appropriate hurdle rate for this project and informed you who will be providing the finance.

Calculate the Internal Rate of Return (IRR)of this project. Record it step by step from beginning till the end result using the IRR formulas, but not formulas on excel.

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