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4( SHOW ALL CALCULATIONS)(30 marks) PLEASE PUT YOUR ANSWER IN A TABLE FORM, SHOWING; NETFLOW,DISCOUNT AND NPV. USE DISCOUNTED PAYBACK METHOD FOR ALL CALCULATIONS. Your
4( SHOW ALL CALCULATIONS)(30 marks) PLEASE PUT YOUR ANSWER IN A TABLE FORM, SHOWING; NETFLOW,DISCOUNT AND NPV. USE DISCOUNTED PAYBACK METHOD FOR ALL CALCULATIONS. Your company is seriously considering investing in a new project opportunity but cash flow is tight these days. Top management is concerned about how long it will take for this new project to pay back the initial investment of $75,000. You have determined that the project should generate inflows of $30,000, $30,000, $40,000, $25,000, and $15,000 for the next five years. Your firm's required rate of return is 12% AND INFLATION REMAINS CONSTANT AT 3%.. A) How long will it take to pay back the initial investment? (3 marks) B) What is the NPV? (3 marks) C) IF USING THE ORIGINAL SCENARIO of rate of return -12% and inflation=3%, an additional $30,000 is invested in the Project in year 3. What is the new payback period and NPV? (6 mks) D) USING THE ORIGINAL SCENARIO FOR A and B, Calculate the payback period and NPV if the rate of return is now 10% and inflation is 5%.( 6 marks) E) USING THE ORIGINAL SCENARIO for A and B, then, If the cash INFLOWS CHANGE from $40,000 to $20,000 in YEAR3; From $25,000 to $20,000 IN YEAR 4 AND From $15,0000 to 25,000 IN YEAR 5; Calculate the payback and NPV( 6 marks). F) Which of B, C, D and E would be considered to be the best investment and why?( 3+3 marks)
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