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4. a) As an owner of small Bus Company, you are planning to invest 1,000,000 to procure 25 units x14- seater mini-Toyota buses and a
4. a) As an owner of small Bus Company, you are planning to invest 1,000,000 to procure 25 units x14- seater mini-Toyota buses and a well-equipped service van to augment your current fleet. The cost of the investment is expected to generate the following net cash flows in four years at a discount rate of 15%. Calculate the Net Present Value for this bus project based on the under listed details (15 marks): Cash flows Investment Year 0 1 Project Profits 2 Project Profits 3 4 Project Profits Project Profits Net flows () (1,000,000.00) 500,000.00 450,000.00 400,000.00 400,000.00 b) State two benefits and two drawbacks for using the Net Present Value (NPV) in investment appraisal (5 marks) 5. A firm's Net Present Value (NPV) is determined by calculating the costs (negative cash flows) and benefits (possible cash flows) for each period of an investment. Using a Passenger Transport Organization as an example, explain a) Two (2) factors that affect NPV and why they do (10 marks) h) Two (2) sources of incoming cash flows (revenue) (10 marks)
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