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Question 6 a) Staysafe corporation is considering an investment that will cost 80,000 with 5 years useful life. The investment in the first three (3)
Question 6
a) Staysafe corporation is considering an investment that will cost 80,000 with 5 years useful life. The investment in the first three (3) will offer after tax cashflows of 23,000 per year and for the remaining two (2) years will offer after tax cash flow of 28,000 per year. If the corporation has cost of capital of 15%. And cut off period for project is 4 years determine:
i) The investment Payback period and the Net Present value (NPV). (4-marks)
ii) Advice management to either accept or reject the investment. (2-marks)
iii) What is your understanding of capital budgeting and its relevance to firm value creation? (4-marks)
Question 7
Business finance is considered key to unlock individual, firms and economic challenges. As a student of business finance, what do you make of the statement and with four (4) reasons justify your position? (10 - marks)
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