Finance and accounting question

Question Two Coventry Motors Limited is a large car dealer business and is considering investing in a new project, for which the following information is available: Initial Investment Life of Project Estimated annual cash flow Residual Value 1,100,000 7 years 205,000 per annum 150,000 The company has a cost of capital of 8%, but uses a 12% hurdle rate when assessing capital projects Required In 900 words answer the following a) Stating clearly any assumptions you make, evaluate the financial viability of the investment by determining the project's: Payback period Accounting Rate of Return Net Present Value using the cost of capital Net Present Value using the hurdle rate (8 Marks) b) Explain in detail the results of your calculations in part (a) of this question Ensure that you state whether the project should be undertaken Justify your answer (Candidates are encouraged to research what constitutes a reasonable return in today's similar business environment) (6 Marks) c) Discuss what is meant by Cost of capital and critically evaluate whether Underwood Limited should use a hurdle rate when assessing the viability of a project considering the issues of using a hurdle rate 5010ACC (8 marks) d) Explain what is meant by the internal rate of return' and critically appraise its usefulness and limitations (8 marks)