Question
Hertford Chemicals Plc is considering the investing in a new chemical processing plant, but has a choice of manufacturing one of two products on it.
Hertford Chemicals Plc is considering the investing in a new chemical processing plant, but has a choice of manufacturing one of two products on it. For the two proposals the company needs to spend BD 100000 as initial investment. Details of the two proposals are summarized below:
Year | Proposal A Earnings after taxation are as follows in BD | Proposal B Earnings after taxation are as follows in BD | @10% |
1 2 3 4 5 | 22000 30000 45000 23000 12000 | 8000 14000 32000 46000 32000 | .909 .826 .751 .683 .621 |
Required:
A. Use the given 10 % PV factor to calculate the Net present value for the two projects.(6 marks)
B. On the basis of these measures only, which project would you recommend?(2 marks)
C. Combine what are the quantitative and financial/ financial factors, should you take in to consideration when declining between projects? (2 marks)
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