Question
Q. 3 DArcy (Builders) Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is:
Q. 3 DArcy (Builders) Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is:
Project cash flows
| Project | A | B | C |
| m | m | m | |
| Initial outlay | (17) | (20) | (24) |
| 1 years time | 11 | 12 | 9 |
| 2 years time | 5 | 7 | 9 |
| 3 years time | 7 | 7 | 11 |
| 4 years time | 6 | 6 | 13 |
The business has a cost of finance of 10% and the capital expenditure budget for next year 25 million.
Required:
- Calculate the NPV of each project.
- Which investment project(s) should the business undertake assuming:
- Each project is divisible
- Each project is indivisible.
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
