Question
Assume that you are appointed as a manager for an upcoming project of HUL company ltd. The company is looking to produce a new cosmetic
Assume that you are appointed as a manager for an upcoming project of HUL company ltd. The company is looking to produce a new cosmetic product. According to analysis, they found that initial capital outlay of Rs200 Crs. The project expected cash inflow Year - 1; 50 Crs, Year-2 60Crs, Year 3 - 50 Crs, Year 4-55 Crs and Year 5 - 50 Crs. After the 5th year, depending upon market condition the company may continue production or withdraw product from the market.
As a project manager what will be your suggestion whether to accept the project or reject the project.
What will be your decision if the cost of capital is 10%?
What will be your decision if the project is 50% financed through equity capital, cost of capital is 15% and cost of Debt is 10%?
What will be your decision if the WACC is 12%?
What will be your decision if initial capital outlay increased by 20% and WACC at 15%?
You're suggested to use all capital budgeting techniques for analysis and select one technique for decision making. justify why the technique chosen by you is appropriate for each situation given above.
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