BATA plc. is considering the following two projects. Only one of which maybe selected. Each project has a required rate of return of 15% for A and 10% for B with the following cash flows Year Project A Project B 0 K (200,000) K (175,000) 1 68,700 50,000 2 44,500 60,250 3 56,500 45,250 4 35,500 80,250 Required: A. Calculate for each project: Payback period for each of the projects, Net present value for each of the projects and Internal rate of return for each of the projects B. Explain which project you would recommend for acceptance for each of the three methods and overall. C. Briefly discuss the relative merits of the pay back and net present value methods of evaluation methods mentioned in (a) above
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
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BATA plc. is considering the following two projects. Only one of which maybe selected.
Each project has a required
cash flows
Year Project A Project B
0 K (200,000) K (175,000)
1 68,700 50,000
2 44,500 60,250
3 56,500 45,250
4 35,500 80,250
Required:
A. Calculate for each project:
Payback period for each of the projects,
B. Explain which project you would recommend for acceptance for each of the three methods and overall.
C. Briefly discuss the relative merits of the pay back and net present value methods of evaluation methods mentioned in (a) above
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