Question 5. Hyde Park Tours Limited is planning to diversify its operations by exploring two new business opportunities. Opportunity City Bus Tour has an expected working life of four years, requires 175000 of initial capital expenditure and a further 50000 of working capital. At the end of year 4 the residual value is forecast to be 100000. Opportunity Cruise also has an estimated working life of four years and has an initial cash outflow of 250000 which includes working capital of 135000. At the end of year 4 the residual value is estimated to be 100000. Estimates for net cash flow for both projects are as Year 1 2 3 4 Year 1 2 3 4 City Bus Tour 90,000 75,000 - 70,000 75,000 Present Value Rates at 15% 0.870 0.756 0.658 0.572 Cruise 95,000 90,000 85,000 80,000 Present Value Rates at 30% 0.769 0.592 0.455 0.350 Required: - a. Utilising the above information, numerically assess the projects using: - Payback Net Present Value using the present value rates at 15% Internal rate of return using present value rates at 30% (5 Marks) (5 Marks) (5 Marks) b. Based on your evaluation, make recommendations as to which project should be undertaken? Please justify your recommendations using appropriate academic literature. (5 Marks) TOTAL MARKS = 20 10

Hyde Park Tours Limited is planning to diversity its operations by exploring two new business oppertunites. Opporturity Cly Bus Tour has an expected working sfe of four years, requires $175000 of initial capital expenoturn and a further $50000 of working capital. At the end of year 4 the residual value is sorecast to be croooo0. Opoortunity Cruise also has an estimated working ille of four years and has an initial cash outliow of E250000 which includes working capital of 5135000 . Al the end of year 4 the resifual value is estrmaned to be ftoo000. Estimates for net cash flow for both projects are as Required: - a. Uilising the above infommation, numericaby assess the projacts using:- - Payback (5 Marks) - Net Present Value using the present value rates an 15\% (5 Marks) - Internal rato of return using present value rates at 30% (5 Marks) 10 B. Based on yout evaluasion. make recommendations as so which project should be undertahen? Please justry your recommendations using apgeoprate academic laerature (5 Marks) TOTAL MARKS =20 Hyde Park Tours Limited is planning to diversity its operations by exploring two new business oppertunites. Opporturity Cly Bus Tour has an expected working sfe of four years, requires $175000 of initial capital expenoturn and a further $50000 of working capital. At the end of year 4 the residual value is sorecast to be croooo0. Opoortunity Cruise also has an estimated working ille of four years and has an initial cash outliow of E250000 which includes working capital of 5135000 . Al the end of year 4 the resifual value is estrmaned to be ftoo000. Estimates for net cash flow for both projects are as Required: - a. Uilising the above infommation, numericaby assess the projacts using:- - Payback (5 Marks) - Net Present Value using the present value rates an 15\% (5 Marks) - Internal rato of return using present value rates at 30% (5 Marks) 10 B. Based on yout evaluasion. make recommendations as so which project should be undertahen? Please justry your recommendations using apgeoprate academic laerature (5 Marks) TOTAL MARKS =20