Question
Cocoa Life Ltd is considering expanding its current cocoa plantation portfolio. The company is currently looking at two countries -The Ivory Coastand Ghana. The company's
Cocoa Life Ltd is considering expanding its current cocoa plantation portfolio. The company is currently looking at two countries -The Ivory Coastand Ghana. The company's plan to issue bonds and new ordinary shares to raise money for the investment. This gives rise to a 12% weighted average cost of capital.
The following data are estimates for the project in these countries.
Ghana
The Ivory Coast
Initial investment ($'000,000)
600
400
Land lease (years)
15
20
Payback period (years)
7
11
IRR (%)
12.50%
16.25%
The Ivory Coast is the world's largest cocoa producer. Major companies such as Nestle source its cocoa from this country. However, reportsonunfavourableworkingconditions including child labour raises someconcerns (seeNestle, n.d.).
Cocoa plantation in Ghana contributes to 15% to the nation's GDP. Ghana is the second largest cocoa producer in the world after The Ivory Coast. Ghanaian cocoa is k
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started