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I am posting this question for the second time because i am not happy with the first answer. can you please show all the calculations-
I am posting this question for the second time because i am not happy with the first answer. can you please show all the calculations- you can make notes on the side if you use a table, so that i can see how you got to the values.
QUESTION 2 (25) Curechem SA Limited is a large publicly traded firm on the Johannesburg Stock Exchange. Based on a R100,000 market feasibility study it is considering the manufacture and sale of a new line of products developed by its R&D research group at a cost of R 250,000. The finance department has gathered the following information on the investment proposal: Initial investment (straight line depreciation) Scrap value (year 4; tax paid yr. 5) Selling price (current price) ice (current price) Expected selling price inflation Variable operating costs (current price) Fixed operating costs Expected operating cost inflation R 9 million R 600 000 R80/yr 4%/yr R35/unit R450 000 3%/yr Market research estimates that demand for the product will be as follows: Year 1 Demand (Units): 50,000 85,000 100, 000 2 75,000 The company has a real return hurdle rate of 12%. Expected inflation over the project's lifespan is 2.5%. CureChem Limited pays income tax at 30% payable 1 year in arrears. The project would qualify for the tax offices "accelerated" capital cost allowance of 33.3% per year on a straight line basis. Required: 2.1 Calculate the flowing values for the investment proposal: i. Net present value ii. Internal rate of return 2.2 Briefly discuss your findings and advise whether the proposal is financially attractive. (4) 2.3 Assuming that the stock market is semi-strong efficient, what will be the implication for the firm's stock price if CureChem goes ahead with the project Step by Step Solution
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