Question
Greenmatch ltd is a solar panel production firm which also provides facilities such as heat pumps and other green energy products. Greenmatch ltd is considering
Greenmatch ltd is a solar panel production firm which also provides facilities such as heat pumps and other green energy products. Greenmatch ltd is considering an investment in new solar production technology. The new investment would require initial capital of 4 million today and additional outflow on manufacture of 1m in each of the years 6 and 7. The net cash inflow for the years 1 to 4 is 2.34 million per year. Some equipment could be sold in year 5 and this would produce a net cash outflow of 4.85 million, inclusive of the cash flows from operation. The required rate of return of Greenmatch ltd is 12 per cent. A. Greenmatch ltd has been known to use a payback period of two years in the past. However, the firms managers believe that this payback period may be too short. Calculate the payback. (3 Marks) B. Calculate the net present value and the profitability index of the project, ignoring tax
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